The number of “green mortgage” deals available to homeowners is growing – but how do they work, and who qualifies for one?

Most high-street lenders now offer some kind of green mortgage. They are usually focused on the energy efficiency of homes, and there are two main types.

The most common approach is to offer those buying a property with a high energy performance certificate (EPC) rating, typically A or B, a slightly better mortgage deal. For example, a lower mortgage rate, cashback or a cheaper fee.

The other type is an incentive for homeowners who want to improve the efficiency of their property. This could be a preferential interest rate for additional borrowing to fund things like solar panels or heat pumps, or cashback once the improvements are complete.

Last year, Virgin Money launched a retrofit mortgage offering borrowers up to £15,000 cashback to go green. This has now been reduced to £10,000.

Nicholas Mendes, mortgage technical manager at the broker John Charcol, tells MoneyWeek: “Ten years ago, there were hardly any green mortgages. Now more than half of lenders have one.” According to Moneyfacts, there were a total of 765 green mortgages on the market in mid-August.

Research by the Green Finance Institute, which launched the Green Home Finance Roadmap in August to encourage sustainability across the UK mortgage market, found that half of all homeowners would use a green mortgage to help them buy or upgrade to a more energy-efficient home.

With house prices rising, it makes sense to see if you could save money with a green mortgage, particularly if you’re buying an energy-efficient property, or would like to make home improvements like adding insulation, double glazing or solar panels.

About 1.5 million dwellings in England now have solar panels – nearly 6% of dwellings – according to Nationwide.

We look at how green mortgages work, who’s eligible, and whether they represent the best deal on the market.

How do green mortgages work?

A common misconception with green mortgages is that they are more environmentally friendly than conventional mortgages, or that the lender is “green”.

However, the “green” in green mortgages refers to the requirements needed to qualify for the deal.

“It does not mean that your mortgage lender will be investing your payments into green initiatives or schemes,” notes Terry Higgins, managing director of TNHG New Build Mortgages.

About 80% of UK homeowners admit they are not familiar with green mortgages and the benefits they offer, according to a survey by David Wilson Homes.

Higgins gives the following definition: “Green mortgages are designed to reward people living in energy-efficient homes or people carrying out green home improvements, and they can come with various benefits, including cashback, lower interest rates, and potentially the ability to borrow more."

Note that green mortgages have lots of different names, such as Green Reward, Green Living Reward and Retrofit Mortgage.

Who is eligible for a green mortgage?

Green mortgages aimed at home buyers are generally only available for properties with an EPC rating of A or B.

Some lenders will look at the standard assessment procedure (SAP) rating – the methodology behind the EPC – to determine if a property is eligible for its green mortgage.

For example, Nationwide offers a Green Reward for homes depending on their SAP rating. Those rated an SAP of 86-91 will receive £250 cashback and those above 92 receive £500 cashback.

Some green mortgages are restricted to new-build homes that are energy-efficient.

Mendes says that eligibility is a barrier with these products. “Most deals are limited to EPC A or B properties, which means new-builds dominate. Older homes rarely qualify, with fewer than 10% of pre-1900 houses even reaching a C rating,” he says.

In terms of cashback rewards for homeowners making energy-efficiency improvements, you usually have to have your mortgage with that lender to begin with. If you want to install, say, a heat pump or solar panels, you can then look to see if your mortgage provider is offering any cashback.

Some lenders offer lower interest rates or even interest-free borrowing for customers that want to fund green home improvements.

Before applying, you’ll need to check whether your home improvement meets the eligibility criteria, as well as any other terms and conditions.

What green mortgages are available?

Some lenders offer cashback to home buyers taking out their green mortgage.

David Hollingworth, associate director at the broker L&C Mortgages, highlights HSBC, which offers £350 cashback for energy-efficient homes with an A or B rating, while Halifax applies £250 cashback. Nationwide pays out cashback of up to £500.

NatWest offers an improvement to the product pricing, often offering deals with the lowest rates but with reduced fees. For example, it currently offers a two-year fixed rate at 3.88% for purchases up to 60% loan-to-value (LTV) with a £1,495 fee. Those buying a property with an A or B EPC rating can have the same rate but with a lower £995 fee, says Hollingworth.

Barclays offers green mortgages for new-build properties. It has a green deal five-year fix at 3.95% to 60% LTV with £899 fee.

On average, green mortgage rates are lower than standard mortgage rates.

For homeowners making energy efficiency improvements, Nationwide offers interest-free borrowing for two years or five years on a loan worth up to £20,000 for eligible green improvements. This includes a boiler upgrade, solar panels, air source heat pumps, cavity wall insulation, double glazing or replacement windows, electric car charging point and loft insulation. You need to have a Nationwide mortgage to apply.

Meanwhile, Coventry Building Society has preferential further advance rates for eligible improvements.

Halifax offers cashback of up to £2,000 to existing mortgage customers that complete efficiency improvements with its Green Living Reward. The maximum is paid out to those installing a heat pump, £1,000 cashback is paid out for solar panels or a battery, while £500 is awarded for other energy-efficient home improvements.

Virgin Money’s Retrofit Boost Mortgage is slightly different as it involves taking out a mortgage, with a higher interest rate than its standard products, and then getting up to £10,000 cashback that must be spent on eligible improvements to the property being mortgaged.

Is a green mortgage the best deal for me?

A green mortgage deal can look tempting, especially if it undercuts the mortgage rate on the lender’s other products, or perhaps offers a lower fee or some cashback.

However, against the wider market, it might not be the cheapest deal for you.

Mendes comments: “Day to day, we often find that while these products look competitive against a lender’s own range, they aren’t the very cheapest on the wider market. Many high-street lenders will beat competition on price, even without a green badge.”

Hollingworth echoes this: “It’s always important to consider the wider market rather than head straight for a green mortgage. Whilst it could offer a better option, there could still be lenders without a green badged deal that could be more competitive.”

While the Moneyfacts data shows that on average, green mortgages have lower interest rates than non-green deals, Rachel Springall, finance expert at the website, agrees that homeowners and first-time buyers shouldn’t immediately assume that a green mortgage is the best option.

“Green mortgages are a niche part of the mortgage sector and navigating them could be a bit tricky as some might not be the best package for a particular borrower. The incentives offered on green mortgages are mixed, so it would be wise for borrowers to go through the options with a broker,” she notes.

Looking ahead, government targets for net zero housing and lenders’ own pledges, such as NatWest and Nationwide aiming for half their mortgage books to be at EPC C or better by 2030, mean there will be more development in this space, according to Mendes.

“There is genuine momentum, although politics could shift the pace,” he says.

“Right now, green mortgages are more about signalling direction of travel than changing the game on affordability. If incentives strengthen through bigger rate discounts or government support, they could become a much more meaningful part of the market.”

Not all banks are equal, so it’s no wonder that Brits are compelled to switch accounts in search for something better.

That could be anything, whether it’s a bank switching offer with a lucrative cash bonus, access to a bank branch, higher interest rates or spending benefits.

The latest Current Account Switch Service (CASS) data shows that more than 12.4 million switches have taken place since the service launched in 2013, with over a million switches made in 2025.

We look at the most popular banks that customers switched their accounts to, what made them move, and whether you should switch banks.

Which were the most popular banks in 2025?

Nationwide again proved to be the most popular banking company that customers switched to between July and September. The building society amassed the highest net switching gains (41,450).

It was followed by Monzo in second place (9,934), and NatWest in third (8,731).

We’ve compiled a list of the top banks and building societies in terms of net gains in a table below.

Customer data from the Current Account Switch Service is published three months in arrears, which is why the data here is from July to September, and not October to December.

Source: Current Account Switch Service. Data shows the number of full account switches completed between 1 July and 30 September, 2025

Of the banks and building societies listed above, four have had cash bonuses for customers switching their accounts. This includes Nationwide, First Direct, NatWest and TSB.

Nationwide’s lucrative year-round offers, such as the £100 Fairer Share bonus, which it has offered for three consecutive years now, the Thank You bonus, and member-only savings products, may have proved attractive to a large number of customers.

Meanwhile, Monzo paid customers up to £50 to refer a friend, which may have driven its popularity.

Which were the least popular banks in 2025?

While a few banks gained new customers, a lot more lost out.

Santander saw the biggest losses (-19,989), as 42,609 switches were made from the high street bank, while it gained 22,620 new customer accounts.

In second place is Halifax with a net loss of -17,341, while Chase had a net loss of -7,623. Chase lost out on many customer accounts after axing its easy access saver rate.

In the table below, we list the banks that suffered from the highest net losses between July and September.

Source: Current Account Switch Service. Data shows the number of full account switches completed between 1 July and 30 September, 2025

Access to online or mobile banking was the most frequently cited reason for choosing a new account, mentioned by 44% of respondents. This was followed by better customer service (36%), attractive interest rates (34%), spending benefits (28%) and other benefits or features (28%).

It comes after more than £31 billion was left in savings accounts paying 1% interest or less, with savers being urged to switch to an inflation-beating savings account.

Should you switch your bank account?

Switching has now become easier than ever before. According to the Current Account Switching Service data, 93% of customers in the last three years were happy with the switching process.

If you use CASS, it takes seven days for the switch to complete. It makes sure that your direct debits, standing orders, and any new payments to your old account are transferred automatically, even after you’ve switched.

However, that doesn’t always mean that moving your money to another account will be the best option for you. It’s always best to consider the long-term value of a current account, like whether you’re getting better customer service, how much you’ll incur in fees or charges, and if you have access to physical branches.

Depending on the type of account you hold, your bank may already be offering better savings rates, travel perks, or spending benefits. So if you’re switching for the cash incentive alone, it might not be worth it in the long run.

We look at whether switching banks can affect your credit score in a separate piece.

Investing seems complex when you first start, but picking the right investment funds for beginners can make it much more straightforward, and give you an easy on-ramp to building your wealth over the long term.

So if you’re wondering how to begin investing, picking out one or two top funds could be a great place to start.

“Investing is a measured and long-term process,” says Rob Morgan, chief investment analyst at Charles Stanley. “It involves taking risk but doing so in a way that minimises and mitigates it, to more reliably harness the growth available across global economies and individual companies.”

Investment funds are a particularly good option for beginners because they offer a convenient way to manage the level of risk you’re taking. Investing in a fund spreads your money, and therefore your risk, across dozens of different companies.

There are funds for almost any type of investment, from sustainable funds that can grow your wealth while making a positive impact, to AI funds that track the world’s most cutting-edge technology.

Investment funds explained for beginners

There are several types of funds, including:

• Open-ended funds;
• Closed-ended funds (or, more commonly, ‘investment trusts’);
• Exchange-traded funds (ETFs).

Each has its advantages and disadvantages. But the simplest and most relevant for beginner investors are ETFs.

An ETF is a fund that trades as a single share on a stock exchange. Its price changes while stock markets are open in line with changes in the price of the assets it tracks. You can buy and sell it in a stocks and shares ISA, just as if it was a stock.

There are ETFs for almost everything, but beginners might be particularly interested in ETF index funds. These track a specific index, such as the UK’s FTSE 100 or the US’s S&P 500.

“If you’re not sure which companies you wish to own, you may want to consider a tracker fund, or an ETF,” says Claire Exley, head of advice and guidance at J.P. Morgan Personal Investing. “These will allow you to hold a small amount of, for example, every company listed in the FTSE 100.”

Index funds are usually low-cost: because they just track an index, there’s not much to pay by way of management fees.

Best of all, they usually outperform more active stock-picking strategies. AJ Bell’s December 2025 Manager versus Machine report found that only 20% of actively-managed funds (IE, those where the manager decides when to buy and sell stocks, rather than just tracking an index) outperformed a passive alternative over the last five years.

Three types of investment funds for beginners to consider

If you are drawing up a shortlist of the first funds to add to your investment portfolio, investment platform AJ Bell breaks the available fund universe down into three categories in terms of the kinds of investments they make.

Global equity tracker funds

Funds that track the global stock market are a great way to get started in investing without having to decide on any specific region or industry.

“These funds provide low-cost exposure to companies around the world, with representation from a wide range of sectors,” said Dan Coatsworth, head of markets at AJ Bell.

Four of the best-known global equities (another word for ‘stocks’) indices are MSCI World, MSCI All Country World, FTSE World and FTSE Developed World. Tracker funds following these indices should register the same price movements (or very close to them) over any given timeframe.

Some of the most popular global stock tracker funds on AJ Bell’s platform are:

Source: AJ Bell, based on net flows from 13 April 2025 to 12 April 2026

Global bond tracker funds

If you’re looking for a more cautious approach to getting started in investment funds, you could look at bond funds instead.

“When shares fall, bonds often fall less and recover faster, helping to smooth the overall investment journey,” said Coatsworth. “That might suit someone in their 40s or early 50s approaching retirement, those already in retirement, or more anxious individuals.”

There are typically three types of bond that bond funds invest in – corporate bonds, government bonds (such as gilts) or a combination of the two (these are known as strategic bond funds).

Some popular bond funds for beginner investors on AJ Bell are:

Source: AJ Bell, based on net flows from 13 April 2025 to 12 April 2026.

Multi-asset funds

Most portfolios combine bonds and equities, as well as other types of asset. You can do this yourself by buying funds specialising in different investments, but a more convenient approach is to buy a multi-asset fund which acts as a self-contained portfolio in its own right.

“The more cautious you are, the greater the proportion you might want in bonds,” said Coatsworth. “However, there’s such a thing as being too cautious. Those with time to ride out the ups and downs of the stock market might want to avoid having too much in bonds as a proportion of their overall portfolio given the returns might be much lower than a more equity-weighted portfolio.”

Six funds for beginners

With input from Charles Stanley’s Morgan, we’ve picked out six investment funds for beginners, which we’ve shared below.

Fidelity Index World

Risk level: medium-high

A low-cost, cheap tracker fund is a great starting point to gain exposure to a market or sector, giving you convenient ownership of all or most of the companies that make up that market’s index.

Fidelity Index World is a good fund for beginners to consider because it provides a convenient tracker for the global stock market.

Personal Assets Trust

Risk level: medium-low

Personal Assets Trust (LON:PNL) is a multi-asset investment trust that sets out primarily to avoid losing money in inflation-adjusted terms (making it a less risky investment compared to funds that are more concerned with growing wealth than preserving it).

The portfolio comprises four main asset types: equities, bonds, cash and gold.

This has proved a resilient combination. The returns from each of these asset classes tend to rise and fall independently of one another, meaning that it can hold up even in changing market conditions.

Vanguard LifeStrategy Funds

Risk level: variable

The advantage of this multi-asset fund range is that it has several different funds, each with a different risk profile, so investors can select the one that best suits them.

Interactive Investor includes three in its quick-start fund range for beginner investors: 20% Equity, 60% Equity and 80% Equity, though the full range also includes 40% and 100% equity options. The remainder of the portfolio is invested in bonds.

As a rule of thumb, the higher the percentage of equities, the higher the risk profile, and the higher the potential returns.

Royal London Short Term Money Market Fund

Risk level: low

Money market funds invest your money as if it was cash, but they tend to generate returns just above the Bank of England base rate.

Interactive Investor includes Royal London’s Short Term Money Market Fund in its quick-start range, and characterises it as very low risk. This is a very cautious option: your investment is very unlikely to fall in value with a money market fund, but it’s also unlikely to grow much beyond inflation.

M&G Global Dividend

Risk level: medium-high

Dividends are the payments that companies make to their shareholders. Ultimately, it is dividend payments – or the expectation of future dividend payments – that gives shares their value.

M&G Global Dividend harnesses the power of dividend stocks, with a global perspective. It holds a wide variety of companies and could be of particular interest to investors seeking a rising income from their investments.

Scottish Mortgage

Risk level: high

Scottish Mortgage (LON:SMT) is one of the best-known investment trusts for innovation-led growth investing.

Morgan believes that anyone taking a long-term approach to investing should consider investing in a fund that looks for long-term growth through technological innovation. Their long-term perspective ought to let them ride out short-term volatility and reap the long-term rewards.

Scottish Mortgage invests in private companies like Elon Musk’s SpaceX or TikTok owner ByteDance, as well as those listed on global stock markets, offering opportunities that are otherwise hard for beginner investors to access.

HSBC’s shares bounced this week after the latest results showed the bank had lifted pre-tax profits by 11% in the third quarter, “significantly beating downbeat expectations”, says Patrick Hosking in The Times. The bank said this was due to “strong performances in wealth, personal banking and parts of the investment banking division”. HSBC also promised a further $4.8 billion in distributions to shareholders through buybacks and dividends. CEO Georges Elhedery reaffirmed his plans to winnow out senior ranks of the bank “at pace”, though he “emphatically” ruled out any break-up of the group.

HSBC’s latest good results have certainly cheered shareholders, say Selena Li and Lawrence White on Reuters – the shares are now at a six-year high. However, experts still warn HSBC still “needs to explain more about the financial implications of its overhaul”, which involves merging divisions as well as dividing management along East-West lines. Elhedery has declined to comment on how much the revamp will save the bank in costs, or how many senior roles may be cut. Instead, he argues that any cost savings will be an “ancillary benefit” from simplifying the management of the bank and removing duplication of roles.

Elhedery is right to be cautious about costs, says Lex in the Financial Times. Any saving from cutting HSBC’s “expensive layer of senior bankers” is going to be limited. Even the purported figure of $300 million looks small in comparison to the $3.8 billion of bonuses it handed out in 2023. Similarly, while separating Asian from Western operations may sound logical, a large chunk of the money it makes in the region “comes from deals that originate overseas from international clients”. Overall, there is a very real risk that Elhedery’s plans end up being one of those “grand global restructuring announcements” that HSBC has made many times before.

What is the state of Britain's other banks?

It’s been a “pretty decent earnings season all round” for the UK banking sector, says AJ Bell’s Russ Mould. NatWest, Lloyds and Barclays all revealed unexpectedly high profits, too. Considering the tougher environment of “falling interest rates and softening economic growth”, shareholders should be “more than satisfied”. Meanwhile, “the absence of any signs of stress among their core customer base” also bodes well.

Perhaps the only cloud on the horizon is the Court of Appeal’s ruling in favour of a claimant who sued Close Brothers over the failure to disclose commissions paid to car deals for car loans, says Hargreaves Lansdown’s Matt Britzman. This suggests that the Financial Conduct Authority (FCA), the City regulator, could take a “harsher view” in its wider investigation into motor finance commissions. If upheld, the verdict would hit Lloyds particularly hard, with a total liability of up to £2 billion, though even then the broader Lloyds investment case “looks solid”.

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Preparations are at an “advanced stage” for HSBC, one of the world’s biggest lenders, to try again to bolt together its commercial banking division with its global banking and markets unit. The revamp could lead to hundreds of job losses in senior ranks, says Patrick Hosking in The Times. 

While HSBC attempted a partial merger of the two divisions in 2020, it had to abandon the effort because of Covid. However, as its shares have greatly lagged its peers in the past nine months, it will restart the plans in the hope of saving up to $300 million. The move may help placate those who have grown frustrated with what they see as the “slow pace of cuts”, says Lex in the Financial Times. It also makes sense to focus on senior management as “that’s where the costs are”.

But the hoped-for $300 million in savings will amount to 1% of the total $32 billion in costs the bank reported last year. This is because a lot of the back-office functions are already consolidated between the two units. To put this into context, costs soared by 12% in the commercial banking division in the first half of this year.

HSBC clearly suffers from “duplication across its different bits”, says Liam Proud for Breakingviews. Still, the merged entity would be opaque – investors could find it difficult “to get their heads around” the performance of a unit that offers everything from small-company banking to underwriting giant debt and equity offerings for multinationals.

A key task for HSBC

In any case, new CEO Georges Elhedery has a “much bigger job” than finding the “modest savings” he is reported to be eyeing up. A key task will be to find a way to grow the bank to make up for the loss in income from declining interest rates. Net interest income (the difference between what the bank makes from lending and what it pays out on savings) is projected to fall 7% this year and 2% next.

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Choosing the best bank for your money isn’t always straightforward. From switching incentives and customer service to branch access, spending benefits and the interest rates on offer, there’s a lot to weigh up before deciding where your cash goes.

We look at the most and least popular banks in a separate guide, where Nationwide stood out thanks to its lucrative cash bonus, Fairer Share payments and top savings rates.

New analysis from Which? sheds light on the best and worst UK banks and bank accounts.

We look at the winners and losers, so you can see where your provider sits.

The best UK banks – how they rank

Which? asked thousands of customers how they would rate their banking providers. The data is based on several parameters, including ease of application and service in a bank branch, over the phone, online and app-based, and customer helplines.

In top place is Starling Bank, which is one of Which?’s recommended providers for the seventh consecutive year. The bank ranks highly in customer service and current account users are happy with its online banking service. Starling also launched a new AI banking tool that helps customers learn more about their spending habits.

Monzo is another one of Which?’s recommended providers. The challenger bank impresses customers with fee-free spending abroad, cashback on eligible spending and competitive savings rates, but falls short in customer helpline services.

First Direct is also in the top rankings – it’s one of only two banks which received full five stars for customer service and telephone banking. It also offers fee-free transactions abroad, and has an attractive bank switching deal.

Among more traditional high street staples, Nationwide ranks highly thanks to its extensive branch network. The building society has pledged to protect its branches from closures until at least 2030.

We look at the full results in the table below.

Source: Which? data based on a survey from September 2025. N/A means not enough responses for a star rating.

The best UK bank accounts – how they rank

Which? has analysed different bank accounts offered by bank and building societies. The parameters it has tested include interest paid, fee-free spending, interest-free overdraft and monthly fee.

Source: Which?. N/A means not enough responses for a product rating.

How to choose the best bank account for you

Despite the above findings, banking expert at Which?, Chiara Cavaglieri, says: “For too long, the biggest banks haven’t had to work very hard to keep customers, but challengers such as Monzo and Starling have quickly made their mark. They’ve forced bigger providers to innovate, and the result is a market where different providers shine in different areas. Even if you can’t bear to ditch your longstanding bank, think about what's important to you.”

With so many accounts to choose from, there are several factors to consider before you make a decision.

While a bank switching deal means customers have extra cash to cover the Christmas festivities, Rachel Springall, finance expert at Moneyfactscompare.co.uk, warns against making hasty decisions.

“An upfront free cash injection is a great sweetener, but consumers should only ever switch accounts if the new deal offers them better value,” she said, pointing out that while free cash offers don’t last forever, customers shouldn’t feel pressured to switch.

If you’re after spending perks and travel benefits, it might be worth checking out the best packaged bank accounts.

Springall said: “If customers opt into a packaged account, one that bundles in benefits, then they could find it to be more cost-effective than taking out separate insurance policies elsewhere, like travel insurance or mobile phone insurance.”

We look at whether travel insurance is worth it in a separate guide.

“There is a plethora of different benefits to choose from, such as high interest current accounts, those with a competitive overdraft tariff, as well as packaged accounts with integrated insurance plans or even accounts that reward savers or spenders,” Springall added.

“Those consumers who plan to make frequent trips abroad can also find accounts that don’t charge them for using their debit card in an ATM or in-store, so they can avoid paying out on transaction fees compared to a more traditional bank account.”

FSCS scheme: Are your savings safe?

The Financial Service Compensation Scheme (FSCS) protects your savings and investments if a financial services firm goes bust.

This includes current accounts, savings accounts, Shariah-compliant accounts, ISAs, and more.

On 1 December 2025, the FSCS limit rose from £85,000 to £120,000. It means that you will be covered for up to £120,000 if your money is with an FSCS-protected institution.

You can check which institutions are covered on the FSCS website.

This HSBC bonus is no longer on the market. Please see our best bank switching guide for the latest deals. 

The switching incentives scene ran dry in the new year, but competition is heating up again as HSBC launches a £220 switching deal to draw in new customers. 

This is the biggest switch deal now available and is HSBC’s biggest cash bonus in five years, with its previous deal offering £205 last October. 

The high street giant has been a popular name in the pool of switching incentives, with data from the Current Account Switch Service (CASS) showing HSBC gained 25,037 bank switches in the third quarter of 2023. 

HSBC joins NatWest and Lloyds Bank in offering free cash which launched deals back in mid-February. 

Even though its incentive is the highest offer on the table right now, is it any good and how do you get the free cash? 

How to get up to £220 when you switch to HSBC

HSBC is offering up to £220 when new customers switch to its UK Advance or Premier bank account, using the banks's switch service. 

But, the £220 is broken down into two parts. Here are all the details. 

How to get £100 

To get £100, you must open one of the eligible HSBC current accounts, use the CASS to make the switch, and complete the following:   

• Switch at least two direct debits or standing orders within 30 days of opening the account
• Pay £1,500 into the account within 60 days of opening the account
• Make more than 20 direct debit payments using your new HSBC debit card
• Pay more than £50 into the HSBC Bonus Saver account

How to get an additional £120 

On top of this, you can get £10 a month for 12 months (total of £120) by doing the following every month:

• Pay in £1,500 monthly into your HSBC current account
• Make more than 20 direct debits each month
• Pay in more than £50 into your Online Bonus Saver
• Log into the HSBC mobile app at least once a month

You won’t be eligible for this switching incentive if you have held an HSBC or First Direct current account since 1 January 2019.  

What’s the difference between the HSBC current accounts? 

The two eligible current accounts in the switching deal are HSBC’s Advance or Premier account. Here’s how they differ.  

HSBC Advance account

The Advance account is free to hold and you can access its 5% regular saver which allows you to save between £25 and £250 a month. 

See how this compares to the 7% top regular saver in our best buy guide. 

The account gives an optional arranged overdraft on a minimum £1,000, depending on your credit history. 

Plus, you can get discounts on eating out, shopping and travel with the Advance account. 

HSBC Premier account

This current account also has no monthly fee but comes with more attractive benefits. 

Including everything that you get with the Advance account, you also get worldwide travel insurance through Aviva. 

You also get access to HSBC’s loyalty cash ISA, offering a 3.2% return. But this isn’t the best rate on the market, as currently you can earn above 5% in the wider market. 

Plus, gain access to HSBC’s two exclusive reward travel credit cards which let you earn rewards and freebies. 

What are the alternative switching deals?

HSBC is leading in the switching incentive market right now, with its up to £220 offer. 

That said, it does require new customers to do a fair bit to earn £100, and a further £120 is even more difficult to get as you need to stick to its monthly requirements. 

Plus, even though you get exclusive access to its savings accounts, they are far from the best deals on the market. 

Natwest is the next best switching incentive on the market offering £200 when you switch to one of its packaged bank accounts- however these hold a monthly fee, starting from £2 a month. 

Lloyds is offering £175 when you switch to one of its Club Lloyds accounts. But again, as these are packaged bank accounts, they come with a monthly fee starting from £3 a month. 

You get access to its 6.25% regular saver. 

The most important thing to remember is when you’re thinking about switching bank accounts, it shouldn’t just be for the free cash bonus. 

You will need to shop around to see which current account suits your needs best. For example, you might be looking for a no-free current account or a packaged bank account that offers travel insurance and AA breakdown cover. 

Some other things to consider when switching also include which lenders offer the best savings rates and an arranged overdraft that is one of your requirements. 

Interest rates on savings accounts are now some of the best we have seen on the market in 15 years, but have they reached their peak for now?

As anticipated, the Bank of England  kept interest rates on pause at 5.25%  and it could mean rates on savings accounts have also reached their peak for now.

MoneyWeek research shows a number of providers have been dropping their or just pulling them altogether in the last week.

MoneyWeek has been tracking the best savings rates, and has found in the last week at least six one-year fixed savings products have dropped rates. 

We’ve already seen NS&I withdraw its marketing leading one-year fixed saver after being on the market for only five weeks. Plus, HSBC also recently pulled its one-year fixed bond. 

James Hyde, spokesperson at Moneyfacts, said: “The Financial Conduct Authority intervention around consumer duty should lead to more movement and competition in the market, but it will still be down to customers to keep an eye out for the best options.”

Here’s what’s happening in the savings market right now and why you need to act fast to bag the best savings deals. 

Fixed savings rates falling 

According to Moneyfacts, the average one-year fixed savings account pays just over 5% for the first time since 2008. 

The best one-year fixed savings rates reached new heights of 6.2% by NS&I at the end of August, but this rate was pulled at the beginning of October. 

Currently, Bank of India is the top one-year fixed product offering 6.05% - down from 6.11% this week. Here are the other providers who have dropped their rates on one-year fixed savings accounts in just the past week. 

The biggest one is from Ziraat Bank, lowering its rate by 0.35%. Zenith Bank pulled its one-year fixed savings product altogether last week, which was offering a competitive rate of 5.9% AER.  

Are easy-access savings rates better than fixed savings? 

One-year fixed savings are still offering better rates than easy access savings accounts, but if you’re looking for flexibility, easy-access savers still remain competitive. 

Paragon Bank recently  launched a table-topping easy access savings account, offering 5.25% AER- beating Santander’s 5.2% easy access saver which got pulled a week early due to high demand in September. 

Paragon’s easy-access account isn’t completely flexible though, as it only permits up to two withdrawals per year. For freedom with withdrawals, you can bag a top rate of 5.2% with Beehive Money or Ulster Bank.  

Will my savings go further in an ISA?

ISAs haven’t been so popular over the last few years due to their poor rates, but competition has started to pick up again, with new products emerging on our best-buy cash ISA tables. 

In the past couple of weeks, Zopa launched its top easy-access cash ISA, offering 5.08% AER. Plus, Virgin Money made the best buy table with its 5.06% Defined Access Cash E-ISA.

Easy access Cash ISAs fall very slightly behind a normal easy access account, but with an ISAs £20,000 tax wrapper, it could mean you keep more of your savings instead of giving it away to the taxman. 

One to three-year fixed rate ISAs also remain competitive, offering up to 5.85% with Virgin Money.

Read more on where is a better home for your money- a savings account or an ISA.  

HSBC's £205 bonus mentioned in this article is now off the market. See our guide best offers for switching banks for the latest cash bonus offers.

HSBC has unveiled a bonus worth up to £205 for new customers who open a current account and take out its global travel money product at the same time. 

While you normally have to use the bank’s switching service, with this offer, you can open a current account without switching current accounts and get the £125. You can grab another £80 if you make a minimum of 5 payments using your Global Money multi-currency debit card by 21 April 2024, which can also be used in the UK.

As well as the two bonuses, the banking giant is offering a prize draw to new customers who open both an Advance current account and a Global Money Account. 

The deal follows recent HSBC’s 5.7% one-year savings bond, which was a time-limited offer. It was withdrawn on 18 October.

We explain how the new bonus works, who is eligible – and when it finishes.

How can I get the £205 bonus?

• New customers need to open an HSBC Advance Account and deposit £1,500 within the first 60 days. 
• You also need to make at least five debit card payments and open an HSBC Global Money Account via the app – again within the first 60 days.
• To be eligible for the Advance Account – which is a fee-free current account – you'll need to be 18 or over and qualify for an optional arranged overdraft of at least £1,000.
• To qualify for either bonus, you can’t have held or opened an HSBC or a First Direct current account since 1 October 2018.

If you meet the above criteria, you’ll receive the £125 bonus.

When will I receive the bonus?

The £125 bonus will be paid into your HSBC Global Money Account 20 days after you qualify for it. The £80 incentive will be paid into the same account next year, between 1 May and 8 May 2024. 

The prize draw will take place on 29 May 2024. 

What is the HSBC Global Money Account?

This is a new international multi-currency mobile account that makes it easy to manage, convert and transfer your money for spending and payments in different countries. 

Customers can send money fee-free in more than 50 currencies to 200 countries using the app. Youcan also apply for a free Global Money debit card to access competitive exchange rates across more than 200 countries and regions.

The contactless debit card can be added to your digital wallet. You can also use the Global Money Account to withdraw cash both inside or outside the UK with no HSBC fees.

To apply for the account, you must have an HSBC current account.

When will I receive the bonus?

• The £125 bonus will be paid into your HSBC Global Money Account 20 days after you qualify for it
• The £80 incentive will be paid into the same account next year, between 1 May and 8 May 2024 

HSBC's 5.7% one-year fixed bond rate mentioned in this article is now off the market. See our guide to best savings accounts for the latest offers on cash savings

If you’re looking for the best savings accounts, you may need to hurry to secure a top rate as some banks are starting to pull their best deals. 

We’ve already seen some top deals close, such as NS&I, which withdrew sales of its one-year fixed bond paying 6.2% after just 5 weeks of the bonds being on sale. 

And now, high-street giant HSBC has said it will be pulling its one-year fixed-rate savings account this Wednesday, 18 October. Earlier this month, the bank increased the rate from 5.05% to 5.7%, making it a competitive option for savers. But the special rate was a time-limited offer, and customers will need to act quickly before it disappears this week. 

Banks and building societies, including high-street lenders like HSBC and Lloyds, have been raising their savings rates over the past few months. 

But with the Bank of England rate frozen and predictions that interest rates could fall next year, some of the top accounts are now being withdrawn, while other saving rates are being cut.

For example, NS&I withdrew its market-leading 6.2% one-year savings bonds on 6 October. Almost a quarter of a million savers managed to grab the top rate before the government-backed savings organisation closed the door on the accounts.

Meanwhile, Santander pulled its best-buy 5.2% easy-access account last month - the deal was due to end on 17 September, but actually finished on 12 September.

We look at how the HSBC account works, and how it compares to other savings accounts.

How does the HSBC one-year account work?

The HSBC Fixed Rate Saver is available to those with a minimum deposit of £2,000. The maximum you can save in the account is £1,000,000.

You need to be an HSBC customer to qualify, and have a current account or savings account (excluding regular savings accounts and ISAs) with the bank. 

Interestingly, children can hold the account, as well as adults. Savers aged 7 and over are eligible; those aged between 7 and 15 will need their application signed by a parent or guardian.

The interest rate is fixed for the duration of the account, and is paid either monthly or annually. The increased rate of 5.7% will apply until 11:59pm on Wednesday, 18 October.

Withdrawals are not allowed. However, if you want to access your money before the year is up, and you have less than £50,000 in the account, you can close it early for a fee of 90 days’ interest.

Is a 5.7% interest rate any good?

A 5.7% rate for a one-year savings bond from one of the UK’s biggest high-street banks is a pretty good deal. However, there are plenty of challenger banks offering better rates, with a handful offering above 6%. 

The Ahli United Bank UK 1 Year Fixed Savings Account* pays 6.1%,  via the marketplace savings provider Raisin UK.

*When you sign up via this link, we may earn an affiliate commission from this deal.

Meanwhile, Habib Bank Zurich HBZ Fixed Rate eDeposit pays 6.03%, LHV Bank 1 Year Fixed Term Deposit (via Raisin) pays 6%, and Cynergy Bank 1 Year Fixed Saver has a rate of 5.95%.

Those with a very large amount of money to squirrel away may wish to consider Ford Money’s 1 Year Fixed Saver, paying 5.95%, as you can deposit up to £2 million in this account.

For the best one-year savings accounts on the market right now, check out our handy round-up.

While the HSBC account may not be able to compete with some of the lofty rates on offer from challenger banks, it is arguably still an attractive offer if you’re an HSBC customer and you want to open an account quickly and simply, and manage your savings (and your current account, if applicable) in one place. 

In addition, the HSBC account can be opened and managed either online or in branch, so if you’re someone who prefers to do their banking in-person, this could be a good option for you. If you’re looking for a decent one-year savings account for a child (aged 7 or over), this could also be a contender.

Packaged bank accounts are current accounts that charge a monthly fee in exchange for certain perks. These could include insurance policies, car breakdown cover, cashback, higher savings rates, or monthly freebies.

Similar to a current account, you can receive or send money, make payments and pay your bills. The difference is that you’ll be charged a fee each month, depending on the type of account you choose, so it’s worth shopping around for the deal that best matches your needs.

The best packaged bank accounts

We’ve rounded up some of the top packaged bank accounts on the market right now.

We take a further look at the accounts below.

What to consider before opening a packaged bank account

Before opening a packaged bank account, make sure you consider all the elements to ensure the perks outweigh the costs.

• Take a close look at any insurance policies being offered. If travel insurance is included, make sure that you’re eligible, if your travel insurance covers any activities you intend on doing, and that the policy covers countries you plan on visiting.
• If you have any pre-existing medical conditions, make sure you tell the bank when you open your account. This could hamper your chances of being accepted for the account, but it’s a better outcome than not disclosing a condition, only for something to happen down the line and find out you are not covered. We look at how to get travel insurance for over 70s in a separate guide.
• Does it suit your needs?: If an account comes with additional perks, make sure if they’re useful to you. For instance, do you go abroad enough to make the most of travel insurance, or would you be better off paying for it separately? Don’t forget to check that the bank account is suitable for you. For instance, you might want to consider what its overdraft limit is and whether it offers branch access, if that’s important to you.

Are packaged bank accounts good value?

Working out if a packaged bank account offers value for money is straightforward: take the monthly charge and multiply it by 12 to get the annual cost. Then shop around to see what the benefits would cost you separately.

Make sure you repeat those processes each year rather than sticking with a packaged account for years that may no longer offer you good value.

For most of June there was only one thing the investment community was focused on: the initial public offering (IPO) of SpaceX, Elon Musk’s space exploration and artificial intelligence (AI) company.

SpaceX’s IPO was the largest of all time, raising around $75 billion for the company and netting it a valuation, at the end of the first day of trading, of over $2.1 trillion, putting it straight into the world’s 10 largest companies by market capitalisation.

DIY investors seem to have bought strongly into the excitement around the launch. SpaceX topped the list of most-bought stocks on investment platform Interactive Investor (ii) during June, while space was also a recurring theme among the most-bought funds and investment trusts.

“Unsurprisingly, Elon Musk’s space company rocketed straight to the top of the leaderboard following its historic IPO on 12 June,” said Victoria Scholar, head of investment at ii.

SpaceX shares closed their first day of trading 56.6% above the IPO price of $135, and continued to soar over the next two sessions, closing 16 June at $211.39.

Some of the fuel has come out of the stock since then, though: SpaceX closed 2 July at $162, 23.4% below its 16 June close.

The most-bought stocks in June

SpaceX led a tech-wards shift in investor behaviour last month, with a number of FTSE 100 regular features displaced by big tech alternatives.

“Unusually, Legal & General, Lloyds, and BP were knocked off the most-bought stocks list in June, replaced by tech names like SpaceX (NASDAQ:SPCX), Micron (NASDAQ:MU) [and] Microsoft (NASDAQ:MSFT) which came in first, second and third position respectively,” said Scholar.

^{Source: Interactive Investor}

Strategy (NASDAQ:MSTR), a US-based tech company famous for holding Bitcoin on its balance sheet and thus acting as a proxy stock for the cryptocurrency, entered the top ten list for the first time this year.

Only three London-listed stocks – Rolls-Royce (LON:RR.), Glencore (LON:GLEN) and Aviva (LON:AV.) – made it into the 10 most-bought stocks in June.

The most-bought funds and ETFs in June

DIY investors’ top fund picks for June reflected “the ups and downs of growth investing”, according to ii’s funds and investment education editor Kyle Caldwell.

“Investors continued to favour global approaches over dedicated regional fund exposure,” he said. “Popular passive funds included Vanguard FTSE Global All Cap Index, HSBC FTSE All World Index, Vanguard LifeStrategy 80% Equity and Vanguard LifeStrategy 100% Equity.”

^{Source: Interactive Investor}

Precious metals were represented despite falling gold prices during the month.

“Royal London Short Term Money Market remains in pole position,” said Caldwell. “The cash-like fund yields around 4%, but this is highly dependent on UK interest rates. If rates were to fall, then this slowly feeds through to a lower yield for such funds.

“However, with the base rate held at 3.75%, they are currently an attractive way of earning a low-risk return.”

The most-bought investment trusts in June

Technology and space dominated once again when it came to DIY investors’ picks of investment trusts during June.

“Investors continued to buy into some investment trusts associated both with technology and the space boom, with Scottish Mortgage (LON:SMT), Polar Capital Technology (LON:PCT) and Seraphim Space (LON:SSIT) occupying the top three spots,” said Caldwell.

^{Source: Interactive Investor}

Equity income strategies still found their place alongside this demand for growth, though, with Greencoat UK Wind (LON:UKW), Henderson Far East Income (LON:HFEL), City of London (LON:CTY) and JPMorgan Global Growth & Income (LON:JGGI) all among the top 10 most-bought investment trusts.

Increasing numbers of buyers have opted for longer-term mortgages to cope with the cost of living crisis but could they be putting their retirement at risk?

HSBC this week became the latest lender to increase its maximum mortgage term, upping it from 35 to 40 years in line with many major lenders, a move that it said would “help make mortgages more manageable with lower monthly repayments and homeownership a reality for our customers.”

But as buyers get on the property ladder later and borrow for longer, there are warnings that they may be putting their retirement at risk.

Analysis by Standard Life suggests increasing pension contributions from age 55 rather than having to make mortgage repayments could boost your retirement pot and lifestyle.

The rise of 40-year mortgage terms 

Longer term or so-called marathon mortgages have become popular amid the cost of living crisis.

That is no surprise with mortgage pricing rising in response to higher swap rates, Bank of England rate rises and economic uncertainty. 

Borrowing for longer helps spread the cost of a mortgage, lowering the monthly repayments. This makes mortgage borrowing cheaper in the short-term on a monthly basis 

The difference means someone with a £200,000 mortgage at an interest rate of 5% would repay £1,169 a month over 25 years. 

If they lengthened their mortgage term to 35 years that repayment would drop to £1,009, while a 40-year term would reduce repayments to £964 per month. That means a borrower could save £205 per month by taking a mortgage out over 40 years instead of 25.

However, borrowers will pay more interest in the long-run.

Around two-thirds of mortgages have terms of up to 40 years, according to Moneyfacts.

By the end of 2022, more than half of first-time buyers and one-third of home movers were borrowing over terms of more than 30 years, according to UK Finance, which says the trend is starting to level off.

Retirement risks 

Keeping mortgage costs low will be a priority for many buyers, especially in the current economic climate. But there are risks to borrowing for longer beyond paying extra interest.

Standard Life says clearing your mortgage a few years before entering your golden years means you won’t need to factor housing costs into your retirement planning.

Additionally, the money that was going towards mortgage repayments could go towards your retirement pot instead, which the provider suggests could “significantly boost” its value,

That is because your salary is likely to be higher as you get older and towards the end of your career, meaning you have more to put into your pension and boost its value.

Analysis by Standard Life found that a 22-year-old who begins working on a yearly salary of £25,000 and pay the standard monthly auto-enrolment contributions - 5% for employees and 3% from employer - could build up a total retirement fund of £461,000 by the age of 66.

However, topping up contributions by 4% for 10 years from the age of 55 - the age at which a 25-year mortgage term taken out at the age of the 30 would be paid off - could result in a total pot of £513,000 – £52,000 more than if no tops up were made.

Even increasing contributions by just 1% from age 55 until retirement at age 66 could lead to £13,000 extra in your pension pot, Standard Life says.

If you have enough money to afford 12% contributions from age 55 until retirement age, your pension pot could end up worth £90,000 extra at £551,000

This assumes annual investment growth of 5%.

“Interest rates have rocketed since the middle of last year and so it’s understandable that people are looking for longer mortgage terms to ease the monthly strain,” says Dean Butler, managing director for retail direct at Standard Life.

“It won’t be possible, or even sensible, for everyone to stick to a shorter mortgage term, however it’s worth considering the potential retirement impact of any decision,” 

“There are obvious benefits to being mortgage free in retirement itself, but additionally having the option to swap mortgage payments for pension contributions in those valuable years leading up to retirement can have a significantly positive impact on your pot, and as a result on your standard of living in retirement.”

The best of both worlds 

Choosing between mortgage payments and pension contributions doesn’t have to be an either-or scenario.

There is an argument that taking out a longer-term mortgage when you are younger can leave you with extra cash to put into a pension. 

Borrowers also have the option to reduce the mortgage term by overpaying when they can afford it and by remortgaging.

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, says the term of the mortgage is a financial planning tool just like any other. 

“A 40-year mortgage term may be the appropriate way forward for a first-time buyer, with a review of that at their first remortgage, when it may be decided that they can afford to reduce the term, due to interest rates at that time or an increase in their income,” he says.

“Likewise, if someone is coming off an ultra-low interest rate deal and their new repayments are putting them under too much financial stress, a longer term can help alleviate that.

“I would be very surprised if someone took on a mortgage in their 20s on a 40-year term and maintained the same term at every step of the mortgage life thereafter.”

Butler says there is a trade-off with mortgage payments being made for longer which increases the chances they will be paying it off right up to or into retirement.

“It’s a catch 22 situation in so far as owning your own home in retirement is a major benefit from a cost perspective but people will need to balance that against whether a longer mortgage also leaves enough head-room for retirement saving too,” he says.

Nationwide, Santander and HSBC are among the larger banks and building societies that have hiked the rates on their savings accounts throughout August. 

This follows the Bank of England upping the base rate to 5.25%,- the 14th consecutive rise.

The push for better savings rates comes from the regulator Financial Conduct Authority (FCA) that found the largest savings providers had only passed 28% of interest rate rises onto their easy-access accounts. Savers with one-year fixed savings accounts fared better – around half of the rate increases were passed on. 

As a result, the FCA will review the savings rates that banks are offering every time there is a base rate change and prompt them to increase their rates. The FCA has warned that "robust action" will be taken against banking giants if rates do not get passed on. 

Some smaller providers have followed suit and raised their savings rates, with Chase and Starling increasing the offering on their savings accounts. 

Here’s a full round-up of all the providers, big and small, that have recently upped their savings rates and how they compare to the rest of the market. 

This article may contain affiliate links – when you purchase through links on our site, we may earn a commission*

Savings rates changes – large savings providers

If you’re looking for a good return on your savings, these are the banks that have hiked their rates on their easy access and one-year fixed products.  

• HSBC - new savings rates are live. There's no rate change on their one-year fixed bond. 
• Lloyds - New rates are live. 
• Nationwide - is offering the most attractive increase on its saving products, with a 0.75% hike on its One-year Triple Access Online Saver. The large building society will hike its rates for the fifth time this year on various savings products between 16 August and 1 September. 
• Santander has responded to the base rate hike by raising only two of its savings products this time, on its Good for Life ISA and Rate for Life savings account. The new rates are live. There's no rate change on their one-year fixed bond. 
• Barclays told MoneyWeek that they plan to raise rates on a variety of its saving products, including fixed bonds and ISAs between 15 August and 1 September. But no details have been given on new rates.

One takeaway from this round-up is that all five banks have raised or will raise the rate on their easy access savings offering. But there’s a catch. Natwest and Lloyds are offering different rates depending on your balance. 

Although rates go up to 3.3% with the Natwest Instant Saver, that’s only if you save more than £250,000. If your bank balance is less than £24,999, the rate drops to 1.75%, which only equates to a third of the Bank of England’s base rate. 

Savings rates changes – smaller savings providers

Here’s what some of the smaller bank providers are doing with their easy access and one-year fixed savings accounts. 

• Starling Bank - has hiked the rate on its one-year fixed savings account from 3.25% AER to 5.25% AER 
• Chase - the rate for Chase's easy-access savings account has increased from 4.07% AER to 4.1% AER
• Shawbrook Bank - has upped the rate of its easy access savings account to 4.93% AER and its easy access ISA to 4.43% AER
• Paragon Bank -  the new double easy-access account (which is limited to two withdrawals per year) is now 4.75% AER. If a third withdrawal is made, the rate drops to 1.5%.

It’s evident that the smaller banks are offering much better rates on their savings products compared to larger banks, with the best savings rates averaging around 4% to 5%.

How do the latest bank rate hikes compare to the rest of the market?

While the recent rate increases from banks are welcome, how do their savings accounts compare to savings rates overall? 

Easy-access savings top rates

• At the time of writing, Shawbrook's easy access account has a top rate of 4.93% AER. it can be opened with a £1,000 deposit. 
• If you’re on the search for an even lower starting deposit, you can start saving in the Chip Instant Access account* with just £1. With that account, you can earn 4.84% AER on your savings, plus unlimited withdrawals.
• Monument Bank's easy-access savings account is offering a return of 4.81% AER. But, to get that rate you'll need a minimum deposit of £250,000.

One-year fixed savings accounts

If you're willing to lock your money away for a year, the best one-year fixed savings accounts are offering rates on the 6% mark.

• Investec Bank tops the table with 6% AER but the account requires a hefty minimum deposit of £5,000
• Kent Reliance is offering a rate of 5.98% AER on its one-year bond, and you can open the account with £1,000
• Charter Savings Bank also lets you earn 5.98% AER on your savings, but the account requires a minimum deposit of £5,000

The big advice when it comes to bagging a good rate with a smaller bank is, their rates change daily. So you have to act quickly if you like the look of one. 

If you’re keen on stashing your cash away tax-free, it's worth considering a fixed-rate ISA which is offering similar rates. 

The Financial Conduct Authority (FCA)  has told some of the country’s biggest banks to boost progress on improving savings rates for customers amid accusations of profiteering. 

Currently, the top savings accounts are offering rates of up to 7% for existing customers, but the industry average is well below this.  

Following a meeting with bank bosses, including those from HSBC, Barclays, Lloyds and NatWest, the regulator said the lenders recognised they “needed to do more to help their consumers access the best rates.” 

But Sheldon Mills, FCA executive director for competition, said "It's not for me to set rates for banks." 

Banks under pressure due to low savings rates 

Despite the soaring cost of loans and mortgages, banks have been attacked for not passing higher interest rates onto savers. 

According to Moneyfacts, the average two-year fixed mortgage rate is 6.52%, with the savings rate on offer from some high street banks well below that figure. Despite increases in recent days, the average one-year fixed savings rate is 4.83%.

The FCA said: “We have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products. We now want to see that progress accelerate.”

The meeting comes ahead of the Consumer Duty roll out - a new string of regulations the FCA said will “put consumer interests at their heart… to ensure their customers are benefiting from better value products.”

High street banks are also facing pressure from MPs. Earlier this week, the cross-party Treasury Committee wrote to the banks asking whether they believe all their savings rates “provide fair value” to customers. 

Dame Angela Eagle, a member of the Treasury Committee, said: “This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”

"With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK's biggest banks step up their measly easy-access savings rates," Harriett Baldwin, chair of the committee, said in a statement. 

Banks boost rates in response

The good news is, banks seem to be getting the message. Ahead of the meeting with the FCA, HSBC unveiled a 0.65% increase on Fixed Rate Saver accounts  - its one-year Fixed Rate Saver increased to 5.05% and two-year Fixed Rate Saver is now 5.1%.

Lloyds is also boosting its rates across its Fixed Rate Cash ISAs from 12 July. Its one-year fix will increase by half a percentage point to 5.45%, with its two-year fix rising to 5.5%.

But any reprieve in cash savings rates is “being drowned out by the stubborn persistence of high inflation,” said Myron Jobson, senior personal finance analyst at interactive investor. 

“Those who can afford to put money away for five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates,” he said.

Compounding the problem is the issue of inertia, with many savers not shopping around for better rates. £250 billion is sitting in bank and building society accounts paying no interest, while £945 billion is in instant access accounts.

At the same time, banks are recording booming profits. 

NatWest reported a 50% bump in profits during the first quarter of 2023 to £1.9bn, while Lloyds filed a pre-tax profit of £2.26 billion, up 46.4% year on year. Barclays reported pre-tax profits of £2.6 billion, up 27%. HSBC meanwhile tripled its quarterly profits to $12.9bn.

In a statement issued alongside its quarterly report, HSBC said the surging profits were a result of “higher net interest income in all of our global businesses due to interest rate rises.”

Bank bosses have been summoned to a meeting with the financial watchdog to discuss concerns surrounding interest rates for savers lagging behind the cost of mortgages.

The Financial Conduct Authority (FCA) expects chief executives from HSBC, NatWest, Lloyds and Barclays, as well as from smaller lenders, to attend on Thursday amid allegations of “blatant profiteering”.

Higher interest rates have resulted in banks increasing mortgage rates sharply, yet savings rates are not rising at the same pace. 

The average easy access savings rate today (5 July) is 2.48% while the average 1-year fixed savings rate is 4.80%, according to Moneyfacts. 

Meanwhile, the average 2-year fixed residential mortgage rate is 6.51% and the average 5-year fixed residential mortgage rate is 6.02%.

The Bank of England raised its base rate to 5% last month and further increases are now expected.

Chancellor Jeremy Hunt has said it is an “issue that needs solving” amid households struggling with the cost of living crisis.

But sources were playing down the likelihood of a charter being drawn up in the vein of the one agreed between Chancellor Jeremy Hunt and the big mortgage lenders.

Meanwhile, Rishi Sunak said the Financial Conduct Authority (FCA) wanted to deliver “better deals for savers”.

The Prime Minister told the Commons Liaison Committee: “What the Chancellor said is the issue needs to be resolved.

“I know that he has met recently with the FCA and they have agreed to deliver better deals for savers by driving competition and increasing reporting, which I think they are doing in the next few weeks, in particular, to make sure that savers are benefiting from higher interest rates.

MPs on the Treasury Committee were stepping up their campaign to increase saving rates for lenders, which are failing to keep up with soaring mortgages.

They wrote to the four biggest lenders demanding answers to their concerns that saving rates are “too low” in the light of the base interest rate reaching 5%.

Dame Andrea Leadsom, the former Cabinet minister who sits on the committee, said that “it’s quite clear they have failed to pass on the rise in interest rates to savers”.

Colleague Dame Angela Eagle added: “This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”

From the end of July, a new consumer duty will be introduced to force financial firms to put consumers at the heart of what they do.

THE BEST SAVING RATES

Even though returns on cash savings accounts are still negative in real terms as inflation at 8.7% eats away at even the most competitive savings rates, if you have cash lingering in an account that pays a poor return, then here’s where you can shift your money to to get a boost.

The best easy-access savings account pays 4.21% from Chip Instant Access Saver. It is only available to existing customers and managed in-app.

The best savings account for existing customers is First Direct’s Regular Saver that pays 7% for 12 months. Monthly savings are limited to a maximum of £300.

Meanwhile, the best one-year fixed savings account is with My Community Bank and pays 6.03%. It has a minimum deposit of £1,000.

For more on savings rates, see our Best savings accounts July 2023. 

If you’ve been looking for the best savings accounts, then you may have felt let down by the high street banks who have recently come under pressure for not passing on interest rate rises to savers as fast as they do to borrowers.

As pressure mounts, banking giants HSBC and First Direct have said that they will today (30 June) increase the rates on saving accounts to give savers more on their cash holdings. 

Chancellor Jeremy Hunt recently said that while banks had been quick to pass on higher rates to mortgage holders they had left savers behind and urged banks to do better.

The lowest rates are on easy access savings accounts, though some fixed accounts have seen better increases.

The Financial Conduct Authority has also stepped in and is due to report by the end of July on how the savings market was supporting savers to benefit from higher interest rates.

While some savers may have savings inertia, now is the time to shop around for a better rate and move your cash.

Kalpana Fitzpatrick, MoneyWeek’s digital editor, and author of Invest Now, says: “Some savers are holding onto cash in accounts paying as little as 0.25% - the base rate is 5%. So, if your cash is languishing in accounts paying little or nothing, move it. It takes minutes to open a savings account; the best ones aren’t necessarily with the high street giants, so take a look as it is just as important to make your cash savings work hard as your investments do.”

If you bank with HSBC or First Direct, we look at what they are offering and how it stacks up against other savings rates.

How much is HSBC increasing its rates by?

Customers with HSBC accounts will see some savings interest rates increase from today - June 30. 

If you have an online bonus saver, you’ll be able to earn 4% in interest on up to £50,000 - previously, this rate was limited to holding of up to £10,000, and anything between £10,000 and £50,000 would only earn 2.3%. This means you can potentially earn up to around £680 more annually in interest.

HSBS is also increasing the rate on its instant access premier savings account by 0.4%, taking it to 2%, and its flexible saver account, pushing the rate to 1.75%. 

The bank currently offers a switching bonus of £200, but is due to remove them on 3 July. 

How much is First Direct increasing its rates by?

First Direct, part of the HSBC group, is also bumping up its rates with its fixed-rate saver account going up from 4.6% to 5%.

It said it plans to pass on further rate increases later this year.

What are the best savings rates on offer right now?

While the rate increases from HSBC is a move in the right direction, there are better rates if you shop around.

MoneyWeek has been tracking interest rates on different types of savings accounts for some months now and some of the rates are the best we have seen in 15 years. Here’s what is on offer right now.

• The top easy access account, from Chip, from 4.21%. Existing customers can get 7% from First Direct, fixed for 12 months. 
• The best one-year fixed account from SmartSave offers 5.86%, while the best two-year fixed account, also from SmartSave offers 5.86%. 

Savers must act fast to get the best deal on savings accounts should act fast, as these can get pulled from the market when the bank reaches it capacity. 

If you’re unhappy with your current account, switching banks by taking advantage of the best bank switching offers can be a good way to move your money and get ‘free’ cash in the process.

More than a million bank account switches took place last year, according to the Current Account Switch Service (CASS). Nationwide recorded the largest net gain, attracting 41,450 customers. Digital bank Monzo ranked second with 9,934 switches, followed by NatWest with 8,731. We delve into the most and least popular banks among customers in a separate piece.

Kalpana Fitzpatrick, editor of MoneyWeek.com, says: “Bank switching deals are a great incentive for anyone looking to move banks. But, before you switch, make sure the bank you are moving to offers what you need – don’t switch just because there is a cash bonus on offer.”

There are currently seven bank switching offers on the market, with incentives of up to £300 in cash, as much as £750 in cashback, or a signature experience worth £600.

We round up the deals available now and explain how to qualify for the bonus.

The best bank switching offers

The Co-operative Bank – get up to £300

The Co-operative Bank’s switch offer is currently the market-leading bank switching deal, but you’ll have to jump through several hoops to be eligible for the full amount.

You can get £125 in free cash, another £75 over three months, and existing members can bag an additional £100 loyalty bonus.

Here’s how to get £125:

• Deposit a minimum of £1,500 into the new account.
• Have two active Direct Debits.
• Complete five debit card transactions.
• Register for the bank’s online and/or mobile banking service.

Once you complete these steps, you will receive £125 within seven days of meeting all of the criteria. You’ll need to do this within 30 days of switching your account.

How to get £75:

To get the £25 per month in the first three months, customers must keep using their account by:

• Depositing £1,500 or more.
• Maintain two active Direct Debits, and
• Making five or more debit card transactions

Your three months will begin on the day after you receive the £125 switch incentive. Your account will then be credited with £25 for each month you do this, for up to three months.

You won’t qualify if you have benefited from a switch bonus at The Co-operative Bank since November 2022.

£100 bonus for existing customers:

You’ll receive another £100 in November if you are an existing customer and:

• Had an account open with The Co-operative Bank or Coventry Building Society as of 21 June 2026
• Met the criteria for the above £125 payment
• Still hold an account in November

NatWest – get up to £250

NatWest is offering £250 to new and existing customers who didn’t have a NatWest current or savings account as of 10 March 2026. To qualify for the switching bonus, you must:

• Open a NatWest Premier account and complete a switch using CASS
• Pay in £5,000 within 60 days (either as a single deposit or in multiple instalments)
• Log in to the NatWest mobile app

The £250 will be credited automatically within 30 days of meeting the requirements.

Customers can also earn up to £9 a month through NatWest’s rewards programme. This includes setting up two Direct Debits, 1% cashback at select retailers, and £1 per month for logging in to the app. Once the balance reaches £5, you can redeem the rewards for cash or vouchers.

Get up to £750 in savings interest

Alongside the switching offer, NatWest is offering a savings bonus worth up to £750 to customers who deposit £100,000 into its Flexible Saver account. This means high earners could get up to £1,000 from NatWest.

Here’s how to qualify:

• Deposit £100,000 into the account
• Maintain the balance for at least 30 consecutive days.

You don’t need to wait to receive the £250 switching bonus before opening the Flexible Saver.

In order to be eligible for a NatWest Premier account, you must meet at least one of these criteria:

• Have an income of at least £100,000 or £120,000 in joint income
• At least £100,000 held in savings or investments with NatWest
• A NatWest mortgage of at least £500,000

However, it’s worth noting that NatWest Group is closing 18 more bank branches by 2027, so if your local branch is shutting down and you prefer in-person banking, it may not be suitable for you to switch.

HSBC – get £220

HSBC’s switching offer is offering new customers £220 for switching to an HSBC UK bank account. Here’s how to qualify:

• Complete a full switch with CASS
• Transfer two direct debits
• Deposit at least £2,000
• Spend £500 on your HSBC debit card

Once you meet the requirements, you will receive the bonus within 60 days.

This offer isn’t available for existing HSBC or First Direct customers, or those who have held an account with either of the banks since January 2023. You will need to apply for the switch on the HSBC app.

Barclays – get £200

Barclays is offering £200 to new customers who open a current account with the bank. To qualify, you need to follow these steps:

• Open a Barclays Bank Account through the Barclays app.
• Complete a full switch, including at least two direct debits.
• Deposit a minimum of £2,000 within 30 days of opening the account.

Once you’ve followed these steps, you’ll receive the £200 in your new account within 28 working days. The switching offer ends on 27 August 2026.

Get a premier experience worth up to £600

Barclays is offering an experience-led reward worth up to £600 for customers who switch to its Premier account. You will need to follow these steps to qualify:

• Open a Premier account using the Barclays app
• Complete a full switch, including moving two direct debits
• Pay in at least £4,000 within 30 days

After you open the account, you can choose from four types of high-end experiences:

• Dining: Restaurant experiences at select UK venues, including the Gordon Ramsay Restaurants. Specially curated menus for Barclays customers, wine pairings, welcome drinks and £50 Uber credit.
• Stay: Luxury UK hotel stays with select partners such as De Vere, Dakota Hotels and Harbour Hotels, including champagne on arrival, a three-course meal, spa access and complimentary breakfast.
• Live events: Tickets to stadium concerts at Wembley, sporting fixtures like England cricket at Headingley and exclusive matchday perks.
• Family: Annual passes to Merlin Entertainments’ attractions, tickets, food and drinks at Cineworld and Picturehouse Cinemas.

Moreover, with a Barclays Premier account, you can get free Apple TV, cashback on spending, improved savings rates, rewards like free drinks from GAIL’s, and 5% cashback at Tesco fuel.

However, in order to qualify for the Premier account, you will need:

• An annual income of £75,000
• At least £100,000 in savings or investments with Barclays

You will not be eligible for the switching offer if you opened an account with Barclays before 9 June 2026.

First Direct – get up to £200

First Direct’s switching bonus is offering new customers £200 if they open an account before 15 July. To qualify for the bonus, you will have to complete the following steps within 45 days:

• Deposit a minimum of £1,000 (in single or multiple deposits) in your account.
• Switch at least two direct debits or standing orders into your First Direct account.
• Register and log on to digital banking.
• Use your debit card at least five times.

Once all the steps are completed successfully, the £200 bonus will be paid to your account on the 20th of the following month.

You are not eligible if you've held an HSBC current account on or after 1 January 2018.

The account gives you access to its 7% regular saver. Plus, there are no fees when spending abroad, and the current account comes with a £250 interest-free overdraft, although this depends on your credit history.

Santander – get £180

Santander’s £180 switching deal is for both new and existing customers. To qualify, you must do the following:

• Complete a full switch using the CASS within 60 days of opening your account
• Pay £1,500 into the account either as a one-off payment or in instalments.
• Set up two direct debits in the eligible account.

Eligible accounts include Santander Everyday, Edge (£3 monthly fee), Edge Up (£5 monthly fee) and Edge Explorer (£17 monthly fee).

The bonus will be paid within 90 days of initiating the switch.

Existing customers can get the bonus by transferring £1,500 from an account held with a different provider to their new Santander account using the bank’s switch service. Plus, they will need to set up two direct debits.

Santander is closing 44 bank branches this year, so if your local branch is closing and you prefer in-person banking, it may not be suitable for you to switch to Santander.

Nationwide – get £175

Nationwide is offering a £175 bonus to new customers. You can get the cash by switching a non-Nationwide current account into a new or existing FlexPlus, FlexDirect or FlexAccount.

To qualify, you must complete the following:

• Use the CASS to complete a full switch within 28 days.
• Pay in at least £1,000 and make at least one debit card transaction within 31 days.
• Switch over a minimum of two Direct Debits.

You’ll receive the bonus within ten days of meeting all the requirements.

Alongside the new switching offer, Nationwide has also launched a 5% Member Exclusive Bond and has started paying its £100 Fairer Share bonus to over four million members for the fourth consecutive year.

How to switch bank accounts

The Current Account Switch Service makes it quick and painless to switch banks, as the banks are required to do the legwork and complete the switch within seven working days. All you do is open a new current account and request a switch via CASS. The service will then close your old account and move all your money, direct debits and standing orders to your new account within seven days.

Plus, for three years, any money that is paid into your old bank account or tries to leave that account will automatically be put into your new account. Still, it is important to remember that while these offers might look attractive, you should only switch to an account that suits your needs, as some accounts may also charge a monthly fee.

You should always check the terms and conditions to make sure you qualify for the bonus before you start the switch process. If you're applying for any credit in the next six months, such as a mortgage, it's also worth being aware that switching bank accounts could affect your credit score.

The Financial Services Compensation Scheme (FSCS) protects savers and investors if a financial institution fails. Set up by the government, the institution is independent and free to use and is designed as a safety net to protect users of banks, building societies and investment accounts.

the FSCS will pay a certain level of compensation per person per financial institution to cover any losses if a bank, building society, pension provider or investment broker goes bust. If you have substantial savings or investments, you may want to set up accounts with multiple financial institutions. If you do plan on splitting your savings, be aware that many banks, building societies and pension providers are part of a suite of financial brands owned by a larger organization, so check you are genuinely saving with two separate institutions.

For more details, including how to check your financial product's eligibility and how to make a claim, go to the FSCS website.

Nearly half of US startups had accounts with Silicon Valley Bank (SVB). So it’s no surprise SVB’s collapse late last week has shaken the industry and prompted wider concerns about the state of the banking sector.

SVB was declared insolvent by the Federal Deposit Insurance Corporation (FDIC), the US banking regulator, on Friday after depositors withdrew more than $40 billion of the bank’s approximately $170bn in assets.

The bank’s collapse is the largest of a US lender since the financial crisis in 2008.

SVB UK was also swept up in the collapse. But HSBC announced today it was purchasing the bank, which counts over 3,000 UK clients including tech and science start ups, for £1.

But what happened to SVB, and what does its collapse mean for investors?

What happened to Silicon Valley Bank?

Tech companies boomed throughout the pandemic, which benefitted SVB. It had a lot of money in deposits, which it invested in long-term, fixed-rate US government bonds.

That’s where the problem started.

SVB invested in long-term bonds in the hopes of making more money in a low-interest rate environment. The problem with this strategy is that long-term bonds tend to be more sensitive to interest rates changes.

When interest rates are low, bond prices rise. But when interest rates are high, bond prices fall.

Interest rates remained low throughout the pandemic. But central banks across the world have been hiking them successively over the last few months in order to control inflation.

So when the US Federal Reserve began hiking its base rate, SVB’s bond portfolio plummeted in value.

This spooked depositors who started withdrawing their money. In order to free up capital, SVB dumped its long-term bonds, realising a multi-billion dollar loss.

The lender’s management then tried to raise $2bn to fill the capital gap, but this only caused further panic among the lenders customers.

Customers initiated withdrawals of $42bn in a single day, and the bank was unable to acquire the funds. Shortly after it was declared insolvent by the FDIC.

This was the biggest bank collapse in the US since the financial crisis in 2008.

But Treasury Secretary Janet Yellen said the federal government would not bailout SVB like it did for other banks in 2008.

However there are reports the FDIC is leading an auction to find a buyer for SVB.

The US government said that it will be guaranteeing deposits for SVB account holders, who would be able to access their money from March 13.

The FDIC typically guarantees deposits of up to $250,000, but the government has said it will pay out for all deposits.

What happened to SVB UK?

The future of SVB UK was uncertain following the collapse of its parent company, causing concern among the 3,300 companies that bank with it.

The Bank of England was planning to put SVB UK into insolvency, but HSBC stepped in to purchase SVB UK for £1.

This should “end the nightmare thousands of tech firms had been experiencing over the past few days,” says Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“HSBC shareholders may have some concerns about the bank snapping up assets which have been under such a cloud of uncertainty, particularly the exposure to bonds, but HSBC says it expects a gain to arise from the acquisition.

“This will be hugely welcomed by the government, given the looming crisis risked overshadowing Budget Day, as a big tech sector bailout would not have been a good look when millions have been told there is little extra money to ease the cost-of-living crisis,” Streeter said.

What does this mean for investors?

Understandably the news has spooked investors, and raised questions about whether we’re headed for another financial crisis.

US president Joe Biden and Treasury Secretary Janet Yellen have both attempted to calm markets.

As well as guaranteeing investors’ deposits, the FDIC is offering loan facilities to other banks who hold bonds that have plummeted in value.

Crucially under the loans the assets will be valued at the price they were issued, not their current market price, which will help prevent losses.

The money will come from fees banks pay into the deposit insurance fund, not from taxpayers as it did in the financial crisis.

But still fears remain that smaller US banks “could become the latest dominos to fall”, added Streeter.

Some of the US’s biggest banks have seen their share prices fall following SVB’s collapse. Wells Fargo, Citigroup and Bank of America are down 7.5%, 6% and 7% respectively.

Shares in banks listed on the FTSE 100 also fell – Standard Chartered dropped by 7%, Barclays by 5.5% and HSBC by 4.5% as investors worry about the implications of the purchase of SVB UK.

But the purchase means UK startups will have access to their funds, so they should be able to continue running business as usual.

“The speed of the response by the Treasury shows the importance it places on the UK technology and healthcare sectors and their contribution to the economy,” said John Glencross, CEO and co-founder of VCT manager Calculus. “The UK venture capital, start up and scaleup community should feel reassured by the outcome.”

“The current turbulence may be unsettling, but long-term investing takes endurance and patience and rather than switching and ditching stocks, riding out the storm is almost always a good strategy when things look rocky,” says Streeter.

“This is the time when the priority should be ensuring investors have a diversified portfolio with a wide range of holdings across different asset classes, sectors and geographies.’’

HSBC has launched a five year fixed-rate mortgage with a rate of 3.99% – the first product to offer a rate lower than the Bank of England’s base rate since the mini-Budget in September.

Mortgage rates hit a peak of 6.65% in September, and though they have since begun to fall they remain a far cry from the 2% rates we saw at the end of 2021.

The average two-year fixed rate mortgage is currently 5.43% while the average five-year fixed rate deal sits at 5.15%, according to analyst Moneyfacts.

The increased rates are partly due to the Bank of England’s series of rate rises. On 2 February it raised the base rate to 4%, marking its tenth consecutive increase. Increased rates have contributed to the property market’s slowdown.

Indeed, mortgage borrowing fell by £1bn between November and December as buyers questioned whether now was a good time to buy a house.

So, the news of a 3.99% product will be welcome by buyers struggling with higher mortgage repayments on top of rising energy bills and the cost of living crisis.

Here’s what you need to know about HSBC’s latest product.

How does HSBC’s 3.99% fixed mortgage deal work?

HSBC is offering a rate of 3.99% on a five-year fixed rate mortgage. It comes with a fee of £999, and customers will need a 40% deposit.

It’s only available to customers who are remortgaging, meaning first time buyers can’t take advantage of the rate.

The good news is HSBC is likely to be the first of a few providers to offer better rates. Lenders including Santander, Barclays, Halifax, Nationwide and Virgin Money have all made cuts to their mortgage rates as they try to draw buyers back in.

Additionally most lenders have priced in the BoE’s expected rate rises, meaning the rates on their products are unlikely to change much.

There are also some things to consider when fixing your mortgage. Inflation is expected to have peaked, and the base rate isn’t expected to climb above 4.5%. This could see mortgage rates drop further, resulting in better deals down the line.

It’s why some homeowners are opting for tracker mortgages instead. These products track the base-rate, and because they are not fixed offer the opportunity to switch whenever a more appealing product comes out.

But uncertainty around property prices and mortgage rates looks set to remain, especially as the cost of living crisis continues to impact household budgets, so it’s important to consider your individual circumstances before making any decisions.

The Treasury Select Committee has grilled the bosses from the UK’s “big four” largest banks over why savings rates are so low, despite Bank of England base rate sitting at 4%.

Barclays, Lloyds, NatWest and HSBC were questioned by the cross-party committee on a wide range of issues, including savings rates, mortgage rates, bank branch closures, changes to financial regulations and even how homeowners in flood-risk areas are treated.

The committee of MPs said it was important to explore whether banks are boosting their profits by increasing the gap between the interest paid to savers and the interest paid by borrowers.

For example, variable-rate mortgage holders were paying over 4% interest at the end of 2022, up from 2% at the start of the year, according to Bank of England data. But the interest earned by savers with fixed-rate cash ISAs only rose from 0.5% to 1% in the same period.

The measly rise in savings rates by some of Britain’s biggest banks is at odds with the big rise in base rate, which has soared from a record low of 0.1% to 4% in just 14 months.

As the committee noted: “Customers of Barclays, HSBC, Lloyds Banking Group and NatWest Group can expect to earn between 0.5% and 0.65% interest on basic savings accounts. MPs on the committee will ask why these rates are so low, and whether banks can be doing more to advise customers on how to arrange their funds to maximise the return they receive.”

Harriett Baldwin, chair of the Treasury Committee, added that “public scrutiny of our largest financial institutions is vital” and that it was important to question the leaders of the UK’s biggest banks “on issues of fundamental importance to our constituents”.

Customer inertia over savings accounts

The committee asked the bank bosses whether they rely on customer inertia over moving to better products.

The Evening Standard reported that Matt Hammerstein, chief executive at Barclays UK, replied: “I definitely refute the idea that we rely on inertia, I don’t think that’s in any way representative of the way we design products or the way we engage customers.”

Meanwhile, Ian Stuart, chief executive of HSBC UK, said: “We actively reach out to customers. Five and a half million emails went out recently to customers… we’re actively trying to bring customers on to the good savings products that we’ve launched.”

“I would argue the vast majority of our customers do shop around.”

Lloyds Banking Group chief executive Charlie Nunn told the hearing: “When you look at instant access savings, we see between 5% to 7% of all of our balances churning – moving between our competitors – every month. So it’s one of the most actively moved products or services that we have.”

Mortgage rate volatility

The bosses were also asked about the mortgage market after rates jumped last autumn amid market volatility.

According to the Evening Standard, Alison Rose, chief executive of NatWest Group, said there was “huge disruption during the mini-Budget when we saw gilts and the swap rate grow very quickly”.

She added that, while mortgage rates are coming down, the bank is helping customers look at their balance sheets “and find the right answer for them”.

The average two-year fixed-rate mortgage is now 5.79%, according to the data provider Moneyfacts. In December, the average rate was 6.01%.

Bank branch closures

There has been a string of bank branch closure announcements recently, and the MPs were keen to find out the extent to which access to cash is impacted by branch closures.

Lloyds and Halifax recently announced they would close a further 40 branches this year, while Barclays said it would shut another 15 branches. Last year, HSBC said it would shut the doors to 114 branches from April 2023.

Ian Stuart at HSBC told the committee the bank was “absolutely committed to a physical footprint in the UK”.

He added: “We think it’s important, but we have to get it scaled properly for the long term.

Stuart said 98% of HSBC’s transactions in December were digital.

Charlie Nunn at Lloyds Banking Group told MPs: “We remain very committed to our branch network.”

Alison Rose at NatWest Group said the bank was seeing “significant shifts in customer behaviour”, adding: “But we recognise we need to look after all of our customers and make sure that we support particularly vulnerable customers.”

The committee also discussed the government’s ‘Edinburgh Reforms’ to financial services, with the chief executives giving their views on plans to relax the ring-fencing regime, which separates retail from investment banking.

Meanwhile, the MPs voiced concern about how homeowners living in a flood-risk area were treated, for example in terms of insurers doing risk assessments and mortgage providers carrying out valuations.

Why haven’t savings rates kept pace with Bank rate increases?

While the Bank of England base rate acts as a guide to banks and building societies over whether they should change their savings rates, there is a stronger force at play: what their competitors are doing.

“No bank is going to hike rates dramatically above the highest rival, as they only need to nudge it slightly over their competitor’s offering to win business,” explains Laura Suter, head of personal finance at the investment platform AJ Bell.

She adds: “On top of this, banks are very keen to protect their profits, which comes at a cost to UK households. While mortgage rates have shot up, savings rates haven’t risen by nearly as much and some banks are worse than others for pocketing the difference rather than boosting savings rates. Banks make money on the difference between what they charge those borrowing money and what they hand over to savers – the bigger the difference, the bigger the profits.

“Banks are also concerned about what’s coming in the rest of the year. A recession means people losing their jobs, which in turn means more people defaulting on their mortgage or other debt, which is a cost for banks. A similar trend will be seen in the commercial market, with businesses defaulting on loans. Many banks are preparing for a wave of defaults and trying to shore up their balance sheets in anticipation.”

How to get the best savings rate

According to Suter, lots of people stashed away cash during the pandemic and many are still sitting on these cash pots, often in their current account or in old savings accounts paying very little interest.

Even if your savings rate was one of the best a year ago, it probably isn’t now, and it pays to shop around.

As Bank rate has risen over the past year, there has been something of a savings war, especially among challenger banks and building societies.

If you hunt around for a better deal you can get more than 3% for easy-access, up to 7% for regular savings and more than 4% for a one-year fixed-rate account.

Check out our round-up of the best savings accounts on the market.

Suter says savers are starting to vote with their feet. “The latest Bank of England figures show that in the final two months of 2022, savers took £7.7bn out of easy-access accounts paying little or no interest and at the same time funneled £17.3bn into fixed-rate accounts, where rates have shot up.”

If your local bank or building society branch has closed recently - or is set to close soon - you’re not alone.

While you can switch bank accounts to find one that has a branch near to you, it is certainly getting harder to tick that box.

Thousands of bank branches have closed in recent years. Lloyds and Halifax recently announced they would close another 40 branches this year, while Barclays said on Saturday it would shut another six branches. Last year, HSBC said it would close 114 branches from April 2023.

The banks say demand has fallen as more as more customers do their banking online and that customers can also use any of the Post Office’s 11,635 branches to carry out most banking tasks.

As branches close, you may see a new “banking hub” pop up in your local area, which allow people from different banks to deposit and withdraw money - we explain below where to find the six which have recently opened. 

We explain how banking hubs and banking pods work, where the new banking hubs will be, and what the alternatives are if your local branch has closed and you still want face-to-face banking.

What is a banking hub?

Banking hubs allow customers from different banks to deposit and withdraw money. They offer a counter service operated by the Post Office, where customers of all major banks and building societies can carry out regular cash transactions, Monday to Friday.

The hubs also provide dedicated rooms where customers can see community bankers from their own banks to discuss more complicated banking issues. The community bankers work on rotation, with a different banking provider available on each day of the week.

In total, there are plans to create 62 hubs, but only six have opened so far. These are in:

• Brixham (Devon)
• Cambuslang (South Lanarkshire)
• Cottingham (East Riding of Yorkshire)
• Rochford (Essex)
• Troon (South Ayrshire)
• Acton, London

The ATM network operator, Link, has also recently announced locations for eight banking hubs:

• Downham Market (Norfolk) 
• Shirebrook (Derbyshire) 
• Otley (West Yorkshire) 
• Sidmouth (Devon) 
• Newton Aycliffe (County Durham) 
• Porthcawl (Bridgend) 
• Withernsea (East Yorkshire) 
• Wellington (Somerset) 

 It is unknown when these particular eight banking hubs will open. We’ll update this article when we know more. 

“Access to cash and face-to-face banking services continues to be important for millions of people across the UK. Not everyone can or is able to go digital yet, so we’re pleased to announce new cash services to support these communities,” said John Howells, chief executive of Link.

Link also announced the planned introduction of cash deposit machines in Keswick in Cumbria, Ripley in Derbyshire, Littlehampton in West Sussex, Whitstable in Kent, Dagenham in Greater London, and Colwyn Bay in Clywd.

There are plans for 38 new deposit services around the UK, where consumers and businesses can deposit cash without having to visit a bank branch.

On top of that there are plans for three fee-free ATMs to open up soon in areas where banks are closing down along with their ATMs. These will open in:

• East Horsley (Surrey)
• Newburn (Newcastle) 
• Ystradgynlais (Powys) 

What is a banking pod?

Barclays has announced it will launch a string of “banking pods” in response to changing customer needs.

The pods are purpose-built, semi-permanent structures in locations such as shopping centres and retail parks. They will provide a dedicated, private space, and can be moved depending on demand.

The pods differ to the shared banking hubs mentioned above, as the pods are only for Barclays customers.

At least 10 pods will be rolled out across the UK by summer 2023 following the success of the bank’s first one in St Austell.

The bank has not yet revealed the locations for the pods, but it says some of them will be areas without an existing Barclays presence.

In addition, six electric vehicle banking vans will be added to Barclays’ existing fleet of 10, enabling the bank to reach customers in remote locations.

The bank also said it is expanding its scheme where it works with local councils and communities to arrange a presence in places such as town halls and libraries.

“Our new banking pods and community pop-ups help us to tailor our in-person support for each location, including support with digital skills. In areas where we close a branch, we will maintain our presence in that community offering an alternative face-to-face solution,” said Jo Mayer, head of everyday banking at Barclays UK.

“They must be rolled out far more quickly”

Critics say banking hubs, pods, vans, pop-ups and any other types of temporary branches all need to be introduced quicker into communities struggling with a lack of banking services.

Jenny Ross, editor of Which? Money, said: “Cash remains hugely important for a significant minority who use it to pay for everyday essentials and keep track of their spending as the cost of living crisis goes on, yet banks such as Barclays continue to close hundreds of branches, making it harder for people to deposit and withdraw it.

“Proposals to plug gaps left by bank branch closures may well be part of the solution to protect access to cash, but must be rolled out in much larger numbers and far more quickly in order for people to feel their benefits.”

According to research by Which? last year, almost a quarter of free-to-use ATMs have vanished since 2018, while 4,685 bank branches have shut their doors - meaning almost half of the UK’s bank branches have closed since 2015.

My bank branch has closed. What are my options?

If your local branch has closed, check to see if there is a shared banking hub near you, or if your banking provider has any community pop-ups. As well as Barclays, TSB also runs pop-ups for its customers, such as in libraries, town halls and churches.

If you have a Post Office near you, you may be able to use its banking services, such as withdrawing cash, depositing cash and cheques and checking your account balance, Customers of Halifax, Lloyds, TSB, Allied Irish Bank, AIB, Bank of Ireland, Bank of Scotland and Virgin Money can access the full range of manual and automated banking services at a Post Office. Other customers may only be able to use certain services.

There’s a handy table on the Post Office website showing which personal services and which business services are available to which banking customers.

Another option if you want to withdraw money and there’s no bank branch, Post Office or ATM near you is to get cashback in a shop. Some supermarkets and convenience stores offer cashback at their tills with your debit card - and you don’t need to buy anything. Type your postcode into the Link website to see your options.

Finally, you could switch to another bank or building society that does have a local branch (although be aware there’s no guarantee this won’t close too).

Changing current account could mean you find one that is better suited to you, for example, offering cashback on bills, an interest-free overdraft and/or a decent savings rate. Look out for banks offering a switching bonus, as this means you’ll bag some free cash too.

If you’re planning a holiday abroad or often go on business trips, using the best cards for travel could help you make your funds go further.

There are many ways to save on holiday, whether it’s booking flights or buying travel money in advance.

But thinking about how you’ll pay for things on your trip is also important, as the wrong card could see you stung with high exchange fees.

You can avoid these charges by using a competitive travel card that comes with zero fees on foreign transactions. We have compiled a list of the best cards for travel abroad, and the host of perks they offer.

Best credit cards for travel abroad

If you are using a credit card, make sure you are in a position to pay off your bill in full at the end of each month. Otherwise, any interest charges will cancel out any benefits.

Lloyds Ultra Credit Card

This card from Lloyds comes with a low APR rate and there is no cap on how much cashback you can earn.

• 1% cashback on all card purchases in the first year, 0.25% after
• No foreign exchange fees or ATM withdrawal fees
• Representative APR and purchase rate of 12.9% (variable)

Barclaycard Rewards Card

• No fees on purchases abroad if paid in full
• 0.25% cashback on everyday spending
• No interest on cash withdrawals if paid in full
• Representative APR and purchase rate of 28.9% (variable)

NatWest Travel Reward Credit Card

• 1% cashback on eligible travel spending
• Or up to 15% cashback at select partner retailers
• Or 0.1% back on all other spending
• No foreign transaction fees on purchases abroad
• 3% fee on ATM withdrawals (minimum £3)
• Representative APR and purchase rate of 27.9% (variable)

Virgin Money Travel Credit Card

• 1% cashback on spending for the first 90 days, 0.25% cashback after that (up to £15 cashback per month)
• No foreign exchange fees overseas
• Representative APR 27.9% (variable)
• Up to 15% additional cashback with select retailers
• ATM withdrawal fees of 5% applies plus interest charge until repaid in full

Santander Edge Credit Card

• 1% cashback (max £10 per month) on all purchases
• No foreign exchange fees on purchases overseas if spent in local currency
• £4 monthly fee
• Overseas ATM withdrawals have a 3% fee (minimum £3)
• Representative APR 37.8% and purchase rate 29.9% (variable) until fully repaid

If you are applying for a credit card, always go through an eligibility checker, like the Card Match tool from our sister site Go.Compare.

We look at the best American Express credit cards and the best credit cards for airport lounge access in separate guides.

Best debit cards for travel abroad

We look at some banks that do not charge fees when using your debit card abroad. However, there may still be ATM withdrawal fees, often set by the ATM provider.

Chase Debit Card

• 1% cashback on eligible spending for the first 12 months (max £15 per month)
• Note: no cashback on overseas spending
• Fee-free spending and ATM withdrawals home and abroad

Chase also gives you access to its 2.25% (variable) easy access saver. However, the interest rate is quite low, so it’s worth checking out our best easy-access savings accounts guide for the top-paying accounts.

First Direct Debit Card

• Fee-free spending abroad
• Fee-free ATM withdrawals abroad, up to £500 per day
• £250 interest-free overdraft

You could get a £175 bank switching bonus for moving your current account to First Direct, and access a 7% regular savings account.

Starling Bank Travel Money Card

• No fees on spending abroad
• No fees on cash withdrawals abroad
• Manage in-app and online
• Maximum £300 ATM limit and six withdrawals per day while abroad

Monzo Debit Card

• Fee-free spending at home or abroad
• 0% interest on purchases over £100 or more paid over three months
• Otherwise 29% APR representative (variable) for up to 24 monthly payments

Make cash withdrawals of up to £200 outside of the EEA every 30 days for free. Anything over that incurs a 3% charge. You can also earn 2.75% AER (variable) with an Instant Access Savings Pot.

HSBC is closing 114 branches from next April as customers increasingly turn to digital banking. The closures will affect everyone from small businesses to the elderly and those who live in remote areas. See below for the full list of all the HSBC branches that are closing in 2023.

However, the bank said it will instead invest millions of pounds to update and improve its remaining 327 branches.

The news follows the announcement that HSBC will boost the interest rate on its regular savings account from 1% to 5% from 1 December – you can find all the details in our best regular savings accounts article.

HSBC is also paying new customers £200 if you switch to them – and of course, if you’re already with HSBC and not happy, then other banks are also paying a switching bonus to move to them instead.

Here’s everything you need to know about HSBC’s branch closures.

Why is HSBC closing its branches?

HSBC said the use of the bank’s branch network has declined by 65% over the past five years, with some serving fewer than 250 customers a week.

Footfall has fallen by 50% in 74% of the closing branches. The decline in physical banking was further accelerated by the pandemic.

In contrast, 97.5% of transactions were completed digitally and there was a 250% increase in the number of digital payments over the last five years.

“People are changing the way they bank and footfall in many branches is at an all-time low, with no signs of it returning,” said Jackie Uhi, HSBC’s UK’s managing director of UK distribution. “Banking remotely is becoming the norm for the vast majority of us.”

Uhi acknowledged branches will “continue to play an important role in day-to-day banking” and added customers can access services through the Post Office networks, the bank’s community pop ups, live chat, social media, and through the phone.

We do not yet have the details of which branches are closing, but as soon as we do we will keep you posted. Sign up to our newsletter to get the latest news.

What do the closures mean for customers?

The announcement will “come as a blow to customers who rely on them – from small business customers looking to deposit their cash takings, to elderly customers who haven’t transitioned to online banking or simply prefer a human touch when it comes to personal banking,” said Myron Jobson, senior personal finance analyst at interactive investor.

“It is also bad news for those with mobility issues and those who live in remote areas should they require face-to-face banking.”

Online banking offers many opportunities, but the closure of physical branches will also make it harder for customers to take cash out should they need it. Additionally, the bank’s digital and telephone banking offerings could use some improvement.

“It’s unacceptable for bank customers to wait up to 30 minutes to speak to someone when it’s their only choice because their local branch has vanished,” said Tobias Gruber, founder and CEO of mycommunityfinance.co.uk. “There are no excuses to keep customers on hold, considering the vast amount of money banks generally save from closing their high street branches.

“Post Offices are one alternative for basic transactions like paying in cheques and cash, but this move by HSBC will undoubtedly leave even more rural customers that don’t wish or are unable to use the internet to do their banking frustrated, stuck and unable to access their money.”

Which HSBC branches are closing?

Here’s a full list of all the HSBC branches expected to close and when

April

• Blandford Forum 18 April 2023
• Bristol Downend 25 April 2023
• Bexhill on Sea 18 April 2023
• Leominster 25 April 2023
• Abergavenny 18 April 2023
• Market Bosworth 25 April 2023
• Cromer 18 April 2023
• Alton 25 April 2023
• St Ives 18 April 2023
• Shaftesbury 25 April 2023
• St Austell 18 April 2023

May

• Wilmslow 02 May 2023
• Stamford 16 May 2023
• Whitley Bay 02 May 2023
• Whitby 16 May 2023
• Coleraine 02 May 2023
• Bridport 23 May 2023
• Bideford 02 May 2023
• Hove 23 May 2023
• Gainsborough 02 May 2023
• Fakenham 23 May 2023
• Launceston 02 May 2023
• Sudbury 23 May 2023
• Arnold 09 May 2023
• Liskeard 23 May 2023
• Didcot 09 May 2023
• Bristol Filton 30 May 2023
• Brecon 09 May 2023
• Dundee 30 May 2023
• Minehead 09 May 2023
• Waltham Cross 30 May 2023
• Dover 09 May 2023
• Hinckley Road 30 May 2023
• Halesowen 16 May 2023
• Market Harborough 30 May 2023
• Stroud 16 May 2023
• Stourport on Severn 30 May 2023
• Brighouse 16 May 2023

June

• Stirling 06 June 2023
• Twickenham 20 June 2023
• Pocklington 06 June 2023
• Ross on Wye 20 June 2023
• Chepstow 06 June 2023
• Hertford 20 June 2023
• Knutsford 06 June 2023
• Wells 20 June 2023
• Frome 06 June 2023
• Bicester 20 June 2023
• Portadown 06 June 2023
• Oakham 20 June 2023
• Penarth 13 June 2023
• New Milton 27 June 2023
• Ilkley 13 June 2023
• Lewes 27 June 2023
• South Shields 13 June 2023
• Pontypool 27 June 2023
• Skipton 13 June 2023
• Beccles 27 June 2023
• Honiton 13 June 2023
• St Neots 27 June 2023
• Sleaford 13 June 2023
• Wadebridge 27 June 2023

July

• Portishead 04 July 2023
• Horsforth 18 July 2023
• Droitwich 04 July 2023
• Gosforth 18 July 2023
• Leatherhead 04 July 2023
• Harpenden 18 July 2023
• Palmers Green 04 July 2023
• Bognor Regis 18 July 2023
• Coalville 04 July 2023
• Marlow 18 July 2023
• Park Gate Southampton 11 July 2023
• Christchurch 25 July 2023
• Wetherby 11 July 2023
• Seaford 25 July 2023
• Port Talbot 11 July 2023
• Blackwood 25 July 2023
• Kingswinford 11 July 2023
• Norwich Mile Cross 25 July 2023
• Long Eaton 11 July 2023
• Ripley 25 July 2023
• Bromborough 18 July 2023
• Tonbridge 25 July 2023

August

• Bristol Westbury on Trym 1 August 2023
• Bethnal Green 15 August 2023
• Ormskirk 01 August 2023
• Hornchurch 15 August 2023
• Putney 01 August 2023
• Colwyn Bay 15 August 2023
• Ashton under Lyne 01 August 2023
• Dorchester 22 August 2023
• Kenilworth 01 August 2023
• Morley 22 August 2023
• Reigate 08 August 2023
• Wymondham 22 August 2023
• North Finchley 08 August 2023
• Ryde 22 August 2023
• Cirencester 08 August 2023
• Windsor 22 August 2023
• Henley on Thames 08 August 2023
• Cardiff Rhyd y Penau 29 August 2023
• Denbigh 08 August 2023
• Leighton Buzzard 29 August 2023
• 122 Finchley Road 15 August 2023
• Eastwood 29 August 2023
• Chippenham 15 August 2023

The following are also closing, but the dates are yet to be confirmed:

• Oxted
• Hythe
• Epworth
• Cowbridge
• Holsworthy
• Settle
• Tenby

Balance transfer credit cards can slash the costs of existing credit card debt and could save you thousands by reducing the interest you pay.

These cards allow you to transfer debt from one credit card provider to another at 0% interest — as long as you keep up with monthly payments and do not use the card for purchases.

Kalpana Fitzpatrick, MoneyWeek’s digital editor, says: “Balance transfer cards can help you clear out existing debt at no extra cost and are great for those that have existing credit card balances.

“But, keep in mind you will need a good credit score to get the top deal and there are often transfer fees to pay, so this only makes sense if you have a fairly large balance and you can pay it off in the 0% period.”

If you’re looking to reduce your credit card debt this year, banks are offering some of the longest deals of more than 30 months with 0% interest on balance transfers.

According to financial ratings expert Defaqto, 12 credit cards are offering more than 30 months with no interest in 2026, while only three such deals were available at the beginning of last year.

We round up the best 0% balance transfer credit cards on the market now.

Balance transfer credit cards vs money transfer credit cards

While both types of cards might sound similar, they serve two different purposes.

Balance transfer credit cards let you shift any outstanding balance from a current card to one with a lower or 0% interest rate, meaning that you can pay off the balance faster.

In contrast, money transfer credit cards allow you to move funds directly from a card into your bank account. This is usually done with a 0% interest rate for a set period of time to help you clear an overdraft or an outstanding bill.

The best 0% balance transfer credit cards

Here are some of the best 0% balance transfer cards on the market.

Cards with the longest offer

Source: Defaqto

TSB Platinum Balance Transfer Card

This is currently the top deal on the market, with the longest duration of up to 38 months. Here’s what you get:

• Up to 38 months, 0% interest on balance transfers, then rate jumps to 24.9% APR
• 3.49% transfer fee
• 0% on purchases for three months, then rates vary
• The minimum you can transfer is £100, up to a maximum 95% of your credit limit from UK cards
• To benefit from the balance transfer offer, it needs to be taken out within 90 days of opening the account.
• You can’t make a transfer from any other TSB cards.

Existing customers can apply on the TSB app.

Barclaycard Platinum Balance Transfer

• Up to 36 months, 0% interest on balance transfers
• 3.45% transfer fee
• 0% on purchases for three months. After the promotional period, a monthly rate of 1.87% or annual rate of 22.44% applies
• To benefit from the balance transfer offer, it needs to be taken out within 60 days of opening the account.
• The minimum you can transfer is £250 across up to five balance transfers. The maximum transfer will be 90% of your credit limit.
• You can’t make a transfer from any other Barclaycard or partner cards.
• After the 0% period, the interest rate jumps to 24.9% APR

New customers can also get £20 cashback when they transfer at least £2,500 within 60 days of opening the account. On top of that, you can get a free 12-month Apple TV subscription. This offer will end on 29 January 2026.

Tesco Bank Balance Transfer Credit Card

• 36 months, 0% interest on balance transfers, then 24.9%
• 3.45% transfer fee
• 0% interest on money transfers for nine months, with a 3.99% transfer fee
• You can transfer up to 95% of your available credit limit

You may receive a purchase rate of between 24.9% to 29.9% variable, depending on your circumstances. If you use your card for spending, you won’t be charged any interest, provided you pay off the balances that aren’t on a 0% rate in full each month.

You can pay with your card in or outside of Tesco and collect Clubcard points. You get five points for every £4 spent using a Clubcard Credit Card at Tesco, one point for every £4 spent, one point per litre of Tesco Fuel, and one point for every £8 spent.

Virgin Money Balance Transfer Credit Card

• Up to 35 months, 0% interest on balance transfers, then 27.9%
• To benefit from the balance transfer offer, it needs to be taken out within 60 days of opening the account.
• 0% interest on purchases for three months, then 27.9% variable
• Transfer up to 95% of your credit limit
• 2.95% transfer fee
• You can't make a transfer from another Virgin Money credit card

Virgin’s balance transfer credit card comes with a relatively high transfer period and a lower transfer fee compared to other providers.

HSBC Balance Transfer Credit Card

• Up to 35 months, 0% interest on balance transfers, then rate jumps to 24.9%
• To benefit from the balance transfer offer, it needs to be taken out within 60 days of opening the account.
• 3.19% transfer fee (minimum transfer of £5)
• 0% on purchases for three months, then rate jumps to 24.9%
• You won’t be eligible if you hold an HSBC Basic Bank Account.

Cards with no or low transfer fee

There are options available for customers who want a 0% balance transfer card with no transfer fee. We round up the options.

Barclaycard No Fee Platinum Balance Transfer Credit Card

• No fee to transfer a balance for up to 14 months
• 0% interest on balance transfers
• 0% interest on purchases for three months
• After the 0% period, the interest rate jumps to 24.9% APR for both balance transfers and purchases
• No monthly account fee
• To benefit from the offer, you must transfer within 60 days of opening your account.

Natwest Balance Transfer Credit Card

• Up to 12 months, 0% interest on balance transfers
• Balance transfers must be made within three months of opening the account
• No fee to transfer
• 0% interest on purchases for three months
• Minimum transfer of at least £100
• Can transfer up to 95% of your credit limit
• After the 0% period, the rate changes to 24.9% for both balance transfers and purchases

Santander Everyday No Balance Transfer Fee Credit Card

• Up to 12 months, 0% interest on balance transfers
• No fee to transfer a balance for the first 12 months
• No monthly account fee
• 0% interest on purchases for three months
• After the 0% period, the interest rate jumps to 24.9% APR for both balance transfers and purchases

You shouldn’t already have another Everyday credit card, and you can’t transfer balances from other Santander or Cahoot credit cards.

Santander All in One Credit Card

• 15 months, 0% interest on balance transfers and purchases
• No transfer fee
• £3 monthly charge to hold the account
• No foreign exchange fees on overseas purchases
• 0.5% cashback on all purchases (up to £10 a month)
• After the 0% period, the rate jumps to 29.8% APR for balance transfers and 23.9% for purchases

You won’t be able to transfer any balances from other Santander or Cahoot credit cards, loans or current accounts.

Tesco Bank Low Fee Balance Transfer Credit Card

• 0.75% to transfer a balance for up to 15 months
• 0% interest on balance transfers for 15 months
• 0% interest on purchases for three months
• After the 0% period, the interest rate jumps to 24.9% APR for both balance transfers and purchases
• 0% interest on money transfers for nine months, with a 3.99% transfer fee
• To benefit from the offer, you must transfer within 90 days of opening your account.
• Collect Clubcard points on spending

If your credit score isn't perfect, you might be offered less time to pay off the balance.

It’s also important that you only use the card to pay off the existing credit card debt and do not use it to spend — otherwise, you could face hefty interest charges. Failing to pay the minimum balance each month could mean you incur fines and damage your credit rating.

HSBC’s shares jumped by 7% on Monday as the bank promised to boost dividends and start paying them on a quarterly basis again from the start of next year, says Kalyeena Makortoff in The Guardian. Pre-tax profit reached just $9.2bn in the first half of the year, compared with $10.8bn in the same period last year; sales were flat at $25.2bn. But shareholders will be in line for an interim cash dividend of nine cents a share. The move comes as HSBC’s top shareholder – the Chinese insurer Ping An – “revived calls to separate the bank’s profitable Asian business from the rest of the lender’s operations”.

The new dividend policy will be welcomed by “disaffected retail shareholders”, who own a third of HSBC’s shares, say Tabby Kinder and Stephen Morris in the Financial Times. Such shareholders were “enraged” by the Bank of England’s decision to prevent UK lenders from paying dividends during the pandemic and by HSBC’s decision to pay out at just half the previous rate after the ban was lifted in July 2021. Indeed, HSBC’s dividend policy was so unpopular that Ping An has put it at the centre of its argument for a break-up.

Higher interest rates boost profits

Ping An picked a “bad moment” to agitate for a breakup from a financial viewpoint, says Jennifer Hughes on Breakingviews. Thanks to rising borrowing costs, HSBC’s net income is set to total $37bn next year, one-sixth higher than this year, while its shares have risen by 37% in a year: it is one of the top-performing “global banking titans”. Meanwhile, a break-up could come with a lot of risks, including “higher taxes and capital charges”. It could even “[jeopardise] the bank’s licences to clear US dollar transactions”. What’s more, HSBC benefits from its 63-country network: “Nearly half the bank’s business with wholesale clients crosses a border, for example.”

HSBC’s new dividend policy, along with its optimistic profit projections, might “placate [most] shareholders in the short-term”, says Ben Marlow in The Daily Telegraph. But it “won’t improve the political backdrop”. Ping An is not like other “shareholder activists”. The group is technically not state-controlled, but it is generally acknowledged that “nothing of consequence happens in China without... the green light from Beijing”. The state is likely to be “agitating in the shadows” for a break-up “as relations with the West become more tense”.

HSBC “has been navigating tricky international waters with aplomb since it was founded in 1865”, says Ruth Sunderland on This is Money. But it’s becoming increasingly clear that its unique position with “substantial operations” in Asia and the West means that it is “at risk of upsetting either China or the US, or both”.

HSBC has been lambasted in the West for its involvement with firms linked to the Chinese repression of the Uyghurs, as well as its refusal to “take a principled stance over Ukraine” by pulling out of Russia. The upshot is that the UK banking authorities “would be prudent to insist it takes steps to protect the British taxpayer in the event of a break-up, just in case”.

As it retreated from markets in the Americas and Europe, HSBC (LSE: HSBA) formally dropped its “world’s local bank” tagline in 2016.

Despite its global ambitions, Hong Kong has always been HSBC’s main market, with around 90% of group profits historically coming from its Asian business. And in recent years management has doubled down on China, shifting $100bn of capital to the region as the bank has exited other regions.

HSBC’s focus on China is producing mixed results

The results of the group’s new strategy have been slow to materialise. Revenues have stagnated over the past six years, and profits have been unpredictable. As an investment, the stock has been dead money since 2017 (even after adding in dividends). It has lagged the market by half over the past decade.

Most of these challenges are a direct result of the firm’s new strategy. Sales have come under pressure as it exits markets, while the costs of the restructuring have eaten into profitability. That’s without considering the twin headwinds of economic uncertainty and ultra-low interest rates.

With interest rates on the up, HSBC’s outlook is beginning to improve. What’s more, even though economic certainty remains, it is in a far better position today to cope with volatility and instability than it was in 2018-2019.

Notably, the company has made significant progress cutting costs and has redoubled its efforts to reduce spending in the second half 2020. It is now beginning to reap the rewards. As other organisations struggle to offset rising wage pressure with higher prices, HSBC is expecting costs to remain flat this year as it cuts a further $2bn from operating spending.

In the first quarter, reported operating expenses declined by 3% as “continued growth in technology investment” offset inflationary pressures.

Lending growth continues to boost profits

Keeping a lid on costs will help HSBC outperform in a tough market. It has already increased its provision for bad loans in the year. It reported a profit before tax of $4.2bn for the first quarter, down $1.6bn due to “a net charge for expected credit losses and other credit impairment charges” as well as the costs of exiting the Russian market.

HSBC also reported a 4% decline in reported revenue to $12.5bn. Less capital market activity hit trading revenues at its investment bank, offsetting lending growth.

Still, lending is a bright spot for the firm. Consumer lending balances expanded to a net $9bn and net interest income increased in all global businesses. The bank’s net interest margin – the difference between the rate of interest the group pays to depositors and charges to borrowers – increased by 0.05% to 1.26% in the first quarter as overall lending income rose by 7.7% year-on-year.

The loan book is where HSBC has the potential to generate real growth over the next couple of years. With a common equity tier 1 ('CET1') capital ratio of 14.1% at the end of the first quarter, and an estimated $700bn in surplus deposits, it has the capital to grow lending volumes.

Investment banking can be a very profitable business, but it is also volatile, requires a lot of balance sheet capital and is very relationship driven. Well-connected (and well paid) bankers are needed to keep clients sweet.

The investment bank is an important part of HSBC’s business strategy, but lending to consumers and businesses is far more stable and predictable. These divisions also require less balance sheet capital and lending decisions can be executed (and serviced) by technology. The fees on a 25-year mortgage might pale in comparison to a $25bn merger, but the lender can process thousands of these lending decisions every hour using technology to reduce costs. This volume and the predictable interest income makes up for the smaller up-front fee.

HSBC is expecting a mid-single-digit percentage increase in overall lending growth this year, due to a combination of higher interest rates and more lending. Management also believes fees from its wealth management business will also recover when pandemic restrictions are lifted in Hong Kong.

If the bank can boost earnings, HSBC shares could be cheap

After half-a-decade of change and development, HSBC has a lot of scope to grow over the next few years. That said, economic uncertainty is already having an effect on profits, and with the outlook for the global economy only deteriorating, I would not rule out further negative developments.

Still, with the shares trading at a price/book (p/b) value of 0.7 and forward price/earnings (p/e) multiple of 9.9, HSBC looks cheap if it can continue to grow over the next few years. Its dividend yield sweetens the appeal. Analyst projections also have the stock yielding 4.3% this year, although management is warning that further share buybacks are unlikely as uncertainty persists.

Considering its valuation, the company could be a cheap way for investors to play the growth of the Chinese economy and rising interest rates. However, as uncertainty builds, some investors might prefer to seek protection elsewhere.

When shareholder activists target financial firms, history is not encouraging. In 2005, there was an activist campaign to prevent Deutsche Boerse from buying the London Stock Exchange.

Werner Seifert, the chief executive of the German exchange, lost his job and Rolf Breuer, chairman of the supervisory board, later resigned.

Yet the Deutsche Boerse management could see value where the activists who disliked the deal could not. London Stock Exchange has increased in value by 16 times since the public spat.

Then there was Knight Vinke’s activist campaign against HSBC during the 2007-2009 financial crisis, encouraging the bank to take more risk at precisely the wrong point in the credit cycle.

More recently, hedge fund Elliott Management’s six-year fight with Bank of East Asia in Hong Kong and Edward Bramson’s three-year battle with Barclays both ended in failure.

I think the reason for those activist failures is that financial companies tend to be run by dull, unimaginative finance types who try to create shareholder value by doing finance-type things: improve margins, cut costs and announce share buybacks. Any activist who buys the shares in a financial company is fighting an uphill battle, because management are already trying to do the obvious and it hasn’t been working.

A declining market

Now an activist hedge fund called Phase 2 has taken a stake in TP Icap (LSE: TCAP), the interdealer broker (IDB) formed from the all-share merger between Tullett Prebon and Icap in 2016. The shares jumped by 11% in response at the end of March.

Interdealer broking has been in a secular decline since after the financial crisis. IDBs match buyers and sellers (normally bank A versus bank B) without revealing the identity of either and take a small cut of the transaction. As the transaction sizes are large and complex, the counterparties prefer to arrange deals over the phone (known as “voice broking”) rather than type orders into a computer.

The brokers then spend the evenings drinking and sharing “market colour” in the pub, where there are no recorded phone lines or legal and compliance staff. This approach often means banks A and B both receive a better price than if they knew the counterparties that they were dealing with. But it’s easy to see why regulators might dislike the opacity of the “over the counter” (OTC) trades that are not centrally cleared, and resent the alcohol-lubricated unrecorded pub banter. Traders at IDBs were key “enablers” of the Libor rigging scandal.

Thus regulators have been keen to move business away from IDBs to more standardised financial products trading on exchanges with central clearing. Until March, that is, when the drawbacks of exchange-traded contracts have become more obvious.

Saved by the LME

Last month, the London Metal Exchange (LME) – the largest market for industrial metals – suspended trading in nickel for a week and cancelled $3.9bn of trades after Tsingshan, a Chinese steel and nickel firm controlled by billionaire Xiang Guangda, was caught in a short squeeze trying to hedge its nickel production.

The problem seems to have been something that IDBs have warned about: many OTC trades can’t transfer to exchanges because they’re impossible to standardise.

Tsingshan mined nickel, but was shorting the standardised nickel contracts that traded on the LME. Tsingshan’s own nickel output was not in a form that could be settled on the LME.

So a firm that should have benefited from the rising nickel price when Russia invaded Ukraine was instead receiving margin calls and was at risk of failure. That is clearly not ideal. One possibility is that regulators may now accept that the voice broking and OTC trades that TP Icap arranges have a place in the financial system.cial system.

It’s hard to believe now, but UK banks’ share prices had a strong start to the year, up between 15% and 25% until mid-February. They reported results for the financial year ending December 2021 at the end of last month, with no obvious problems. We saw profits rebound and outlook statements suggest improving revenue and further capital returns to shareholders in the form of dividends and share buybacks. Then Russia invaded Ukraine and NatWest’s, HSBC’s and Lloyds’ share prices fell by more than 20% from their 2022 highs. Barclays has been hit even harder, down 30%. They have since rallied somewhat, but still remain down by between 12% (HSBC) and 22% (Barclays).

Direct exposure to Russia plays little part in this. UK banks have $3bn exposure to the Russian financial system, according to the Bank of International Settlements (BIS). While $3bn may sound like a lot of money, Austria (mainly Raiffeisen) has six times more exposure at $18bn. French (mainly Societe Generale) and Italian banks (Unicredit and Intesa Sanpaolo) have eight times more exposure at $25bn each. Societe Generale has said that it would be able to withstand the extreme scenario of having its Russian bank confiscated by the authorities, but so far banks have admitted losses that are in the tens of millions, not tens of billions.

Following the 2008 financial crisis, lenders are in much better shape to absorb losses, mainly because regulators demanded that they rebuild their capital ratios and fund with more equity. Excluding NatWest – which has sold businesses and shrunk total assets by a trillion dollars – the sector has now increased tangible equity funding by around $90bn in the last ten years. In total, UK banks have $420bn of equity to absorb losses. So while $3bn UK bank direct exposure to Russia might sound like a lot of money, it really isn’t compared with the equity on their balance sheets, and is much less than that of European competitors.

Reassuring results

Results for the 2021 financial year were reassuring. Bank profits have been in long-term decline, but recovered in 2021. This was driven by lower bad debts compared with 2020, because banks took large provisions at the start of the pandemic and found that bad debts weren’t as high as the worst-case scenario. Hence statutory profit before tax doubled at HSBC and trebled at Barclays. The two banks the government rescued in 2008 fared even better, with Lloyds increasing profit before tax sixfold and NatWest recovering from a loss in 2020 to report a £4bn profit.

All UK banks have profitability (as measured by return on tangible equity – ROTE) targets of 10% or above and the outlook statements (which were written before the Russian invasion) sounded more confident that these can be achieved. For instance, HSBC said that it was likely to achieve at least 10% ROTE in the 2023 financial year, a year earlier than it had previously expected. Barclays and Lloyds already exceed their targets, reporting 13.4% and 13.8% ROTE respectively. This was helped by each bank’s revenue performance, but also a £0.7bn impairment release for Barclays and a £1.7bn release for Lloyds.

NatWest announced a £750m buyback; Barclays £1bn and Lloyds £2bn. The Asian-focused banks (HSBC and Standard Chartered), which are reporting lower returns and were trading on lower price to tangible book multiples, announced $750m and $1bn buybacks respectively. However, those buyback announcements have done little to support share prices. Since the obvious exposures to Russia’s economy are manageable, it’s the secondary and tertiary effects that share prices are responding to, and that’s what we should be thinking about as well.

Central banks have been slow to tighten

Merryn interviewed Andy Haldane, previously the Bank of England’s chief economist, for the MoneyWeek podcast in July last year. Haldane worried that other central bankers were too relaxed about the risk of inflation and that its effects might not be transitory. In June last year he was the only member of the Bank’s monetary policy committee (MPC) to vote to raise interest rates. He suggested that inflation could exceed the Bank’s 2% target for longer than most people expected, which would result in central bankers’ credibility being questioned.

Although central banks were slow off the mark in tightening policy, by the start of this year the strength of the post-pandemic economic recovery meant that most analysts were expecting to see steadily rising interest rates. You may be wondering: if interest rate rises have been expected, why the panic now?

Ultra-low interest rates are no good for banks, because banks make money from lending out their deposit funding. In normal times, customers’ deposits (which are liabilities on banks’ balance sheets) represent a cheap and stable source of funding. However, when interest rates are below 1%, banks don’t derive any benefit from this deposit funding, because there’s so much other liquidity freely available. As interest rates rise, banks will be slow to pass on the benefit to savings customers. Instead, net interest margins will widen (which is better for shareholders than it is for customers). As long as central banks are responding to a strong economy, rising interest rates are good news.

That was the bull case. But Russia’s invasion of Ukraine and the oil price rising to over $120 per barrel has changed the outlook.

The threat of stagflation

HSBC warned in its annual report that “further increases in energy prices – for instance, as a result of escalation in the Russia-Ukraine crisis – could keep inflation high and force central banks to tighten monetary policies faster than currently envisaged”. During the global financial crisis of 2008-2009, oil peaked at almost $150 per barrel – trebling from the $50 per barrel it traded at in January 2007. At the time a wiser, older broker told me: “Oil has never trebled in value and not caused a recession”. It wasn’t different that time and it probably won’t be different this time.

The problem is that we may see consumers’ disposable incomes being squeezed by higher commodity prices, rising inflation and rising unemployment all at the same time. That is what happened in the 1970s and it’s known as “stagflation” (stagnation + inflation). History shows that while quantitative easing might have helped stimulate growth from 2008 onwards, central banks can’t print their way out of a commodity shock. Longer term, rising inflation combined with rising unemployment is unambiguously negative for banks’ share prices. Any benefit from higher interest rates would be wiped out by bad debts.

These are the risks that share prices are reflecting. And if we see stagflation, investors should avoid the sector altogether. But if these fears are overstated, there could be some value in banks at this point.

The case for NatWest – Britain’s worst bank

A common-sense investment strategy is to pick a sector with favourable long-term prospects and buy a company from that sector that has favourable economics. An example might be Halma or Spirax Sarco in the engineering sector.

When it comes to UK banks, common sense works less well. The “quality” bank with the best long-term record is HSBC, whose share price has halved in value in the last 20 years. It’s not much good to point out that in relative terms HSBC has done better than the competition: Lloyds and NatWest were part-nationalised and shareholders diluted by the government in 2008. Barclays has fared little better, with the shares down by 70% compared with 20 years ago. In short, banks have not been “buy and hold” investments. With that in mind, I would suggest a different, counter-intuitive approach: wait until the tide is on the turn and then buy the lowest-quality bank, which is NatWest.

Expectations are low: NatWest lost money for nine consecutive years following the financial crisis. However, NatWest has essentially been three businesses i) a non-core shrinking “bad bank”; ii) good businesses that it was forced to sell as a result of receiving state aid (eg, Direct Line Insurance); and iii) a profitable core franchise. The years since the financial crisis have been dominated by the first two factors, but by their nature they have declined in importance and the core franchise should become more important.

NatWest’s annual report shows the bank should benefit by almost £1bn from a one percentage-point parallel shift in the sterling yield curve (that means short-term rates rise as the Bank of England raises the base rate, but the ten-year bond yield – which central banks don’t control – goes up by the same amount). That’s an automatic benefit equal to 25% of last year’s profit before tax of £4bn. As long as the yield curve remains upward sloping – meaning short-term rates (eg, 2%) remain lower than longer-term bond yields (eg, 4%) – some of that benefit is sustainable in future years.

Aside from the macro-economic background, there are still company-specific concerns. For instance, last year NatWest paid £466m of “conduct costs” for the financial year 2021, including £265m for money laundering for a Bradford jeweller that deposited £260m in cash, some in bin bags with a “musty smell”. Many of these problems were the result of cultural failings – and as the bank shrinks, it should become easier to avoid these hangovers from the past. Note also that the UK government still owns 52% (down from 97% in 2008), but not all of these shares are being placed on the market. Instead, NatWest is buying back from the government at the market price.

NatWest is trading on 0.5 times revenue and 0.6 times tangible book value. The forecast price/earnings ratio is less than six times forecast 2023 earnings, according to SharePad. That suggests investors believe it will deliver returns well below management’s target of 10% ROTE. But having shrunk its balance sheet by over £700bn in the last decade, the bank has been de-risked. The share price currently looks to be anticipating a very difficult stagflationary environment. The Ukraine war and sanctions may drive that scenario – but if we see commodity prices fall, that would be the signal the tide has turned, and would be the time to buy.

It all started with the Big Bang in 1986. That was Margaret Thatcher’s attempt to shake up the cosy relationships in the City of London and build a globally competitive financial services industry of which the country could be proud. The old separation between brokers and jobbers (market makers), and between retail and investment banking, were dismantled and cleared away – without much consideration of whether there were sound reasons for these divisions to exist, like Chesterton’s Fences.

Retail banks such as Lloyds, Barclays and Midland were allowed, if not encouraged, to own stockbroking firms. The likes of de Zoete Wedd, Hill Samuel and Samuel Montagu were bought by UK retail banks. Other brokers such as Phillips & Drew, Warburg’s and Smith New Court were bought by large investment banks from overseas. UK banks expanded into new territories and built empires where the sun never set. Banks attracted a new breed of rocket scientists and physicists to help them price complex derivatives. A new model emerged: “universal banking”, implying a bank could do everything under one roof. London became a centre of global financial competition.

The Big Bang was good for London as a financial centre, but there were two questions no one thought to ask: was it good for customers, and was it good for shareholders? The answer to both questions is an uncontroversial “no”.

Few benefits for customers

Barclays’ fixed-income division may have risen up the corporate-bond underwriting league tables, but it is hard to see how this brought any benefits to a Barclays current-account customer, for example. Even for retail banking products, having a current-account relationship with one bank doesn’t mean a better mortgage deal or cheaper home insurance. It is almost always true that customers do better to look at the best-buy tables than trust their bank to cross-sell to them. This is especially true of mortgages, where high house prices mean a large mortgage over 30 years is very sensitive to the interest rate offered, and hence customers would be mad not to go to a mortgage broker to find the best deals on offer. The same logic applies to credit-card customers, driven by eye-catching balance transfer rates. So using current accounts to cross-sell additional banking products has proved more difficult than universal bank management would like to admit.

It is even harder to see how a customer of what was once Midland and is now part of HSBC benefits from the parent company’s high market share in Hong Kong, let alone the ill-advised expansion into Mexico, Brazil, Argentina, or risky US subprime mortgages. It is patently ridiculous to claim that HBOS, the UK’s biggest mortgage lender, was somehow helping local borrowers in Halifax by also lending money to fund the buy-out of M Resort Spa Casino in Las Vegas in the run-up to the global financial crisis in 2007-2009. Indeed, HBOS’s management were securitising their high-quality UK mortgages and selling them in financial markets, and replacing these assets with collateralised debt obligations (CDOs) sold to them by US investment banks, which contained packaged up lower-quality US subprime mortgages.

No economies of scale

Aside from customers, the universal banking model has not been kind to shareholders either. The UK banks have underperformed the FTSE All Share index since 2002. Yes, even before the financial crisis banks were unloved by fund managers, who worried about overleveraged balance sheets, and how sustainable returns on equity would turn out to be. As it happened, the fund managers were right to be wary.

As the pull of size and consolidation worked on UK banks like gravity, this was justified in the name of efficiency. The trouble is that there is very little evidence that big banks are more efficient. Instead, they became in danger of collapsing under their own weight, like financial black holes. The cost/income ratios for large UK banks such as Barclays, HSBC, Lloyds and NatWest were all above the 60% level in the 2020 financial year – not much improvement from cost/income ratios seen ten, 20 or even 30 years ago. The smaller UK mortgage banks such as Northern Rock (before it failed) operated a more efficient model, with a cost/income ratio close to 30%.

My own experience of banking efficiency as an employee supports this. Over the years I have worked at both large banks (Credit Suisse, Societe Generale) and smaller brokers (none of which have survived to the present day.) Arriving at any small broker on my first day of work, my IT systems were set up, my Financial Services Authority registration had been transferred over and my new colleagues were pleased to see me. At large banks the first day tended to be shambolic. Most conversations with HR and IT started with the sentence: “Oh, hello! We didn’t know you were starting today”.

That’s because bringing all the banking activities under one roof created more complexity than any efficiency savings. Banks still needed to spend lots of money on technology systems. And any savings from streamlining the back office were lost, because they needed to employ an army of legal and compliance staff to manage conflicts of interest, for instance building “Chinese walls” to keep employees with inside information separate from market-facing roles and prevent the bank being fined by the regulator. The huge increases in computing processing power and decline in the cost of computer hardware hasn’t benefited shareholders in banks at all. By December 2014, Antony Jenkins, the then-chief executive of Barclays, was admitting that the universal banking business model was dead. Diversifing by business, customer and geography hadn’t worked.

Banks have many challenges

In recent years, low interest rates have made life even harder for banks. Most of the time, banks make a margin on their retail deposit funding, because their average interest costs are below central bank rates. But when base rates drop below 1%, margins shrink because the banks can’t charge customers enough for looking after their savings (notwithstanding the efforts of some European banks to levy negative rates on retail deposits). As interest rates rise, analysts expect banks to increase revenue. Still, while margins are set to improve, technology spending is likely to rise even faster and bad debts are hard to predict.

Setting aside the barrage of regulatory fines, the other reason that banks have struggled to generate the return on equity (ROE) that the market wants (10%) is that the regulator has demanded that they fund their balance sheets with less debt and more equity. Larger banks that are judged “systemically important” have to fund with even more equity, because of the serious consequences of failure. In very simple terms, that even bankers can understand, if the “R” of ROE stays the same but the denominator “E” increases, then it is a mathematical inevitability that ROE will fall.

A further problem is that banks tend to reward their loyal customers with worse deals than the new customers they are trying to tempt away from other banks. In the short term, this strategy works. Customers have better things to do than check they’re still getting a good deal every couple of months. But over time, the strategy is bad news for shareholders. It’s terrible for banks’ brands to use inertia from loyal customers to generate high returns. Thus the last few years have seen disruptive new entrants, such as Atom, Monzo, Starling and Funding Circle.

In theory, these financial technology (fintech) firms can offer more competitive services because they don’t have legacy IT system costs or a branch network. That said, given that the disrupters tend to be loss-making, it could just be that their services are being funded by deep-pocketed venture capitalists.

Last year the UK saw $11bn of investment into fintech. There were 713 deals, with Revolut, Monzo, and Starling in the top five amounts raised. Zopa, the peer-to-peer lender founded almost 20 years ago, still managed to raise $220m from SoftBank’s Vision Fund 2. The UK fintech sector seems particularly good at attracting capital, because that $11bn is more than double the next largest in Europe: Germany ($4.4bn), followed by France ($2.3bn) and Sweden ($1.7bn). Overall, $24.3bn was invested across the continent in 2021, with the UK representing nearly half (45%).

Most disrupters aren’t disrupting

That sounds impressive, yet the pandemic has not been the boon for fintech that it has been for tech firms, as Marc Rubinstein points on Net Interest, his financial sector blog. Monzo’s fund raise in May 2020 was at a 40% discount to its previous funding round. German digital bank N26, funded by Peter Thiel, pulled out of the UK after finding the competition too strong.

Meanwhile, branch-based challenger bank Metro Bank has fallen 95% since its initial public offering (IPO), while peer-to-peer lender Funding Circle is down 75% since its IPO at the end of 2018. These have not been anyone’s idea of a successful investment.The problem is that UK banks’ core business of taking customer deposits and lending out money is highly competitive. Thus the fintech winners are not the ones trying to re-invent universal banks. Revolut and Wise (formerly TransferWise) show that fintech isn’t just about technology, it’s also about finding the areas of greatest risk-adjusted return. They have focused on cross-border payments, attacking the huge difference between the currency rates available to large corporate clients in wholesale markets and the price that retail banking customers pay.

Ten years ago there was a complaint to the Office of Fair Trading by consumer groups because banks were charging 3% on foreign currency transactions. Some debit cards also added a further fee of £1.50 per transaction, while using a bank card to withdraw cash abroad could cost up to £4.50 a time. At the time a spokesman for the British Bankers’ Association (BBA) blamed the high fees on foreign payment systems, saying “transaction costs abroad are driven by the costs of overseas payment systems, often in countries where free banking does not exist”.

Of course, this was nonsense. And hence both Revolut and Wise were founded by eastern Europeans who were appalled at the price gouging from banks when they wanted to send money home.

Wise and Revolut: the two winners

Wise was originally a way to send money to bank accounts overseas (see below). It unbundled a specific financial product and offered better value than the competition, with no cross-subsidisation.

Revolut began as a pre-paid card and an app for spending money abroad. It planned to levy a small fee every time a customer used the card, but realised that there wasn’t enough money in this to support the cost and started charging subscriptions. It is remarkable that an app can charge customers up to £13 a month, while UK retail banks with higher-cost branches and legacy systems struggle to convince customers to pay anything. Rather than lower costs, Revolut is able to make money by charging customers to access services they value, such as crypto trading, which has done well over the pandemic. That said, Revolut’s subscriptions made it £222m of revenue in 2020, but direct costs and administration expenses meant that the business made a loss of £207m the same year.

Wise and Revolut attracted millions of customers, despite not having a banking licence. They had an e-money payments institution licence, which means that they weren’t able to lend out money to borrowers and take credit risk. Instead, they have to keep customer funds in cash or other low-risk alternatives. (Revolut was granted an EU banking licence last year.)

So the great irony of fintech is that technology has not meant bigger, more efficient banks. Nor has it allowed new entrants using technology to disrupt saving and lending. The real success story is built on the fact that wholesale customers who deal in large size receive a better price than individuals. That’s true in any industry and financial services is no different. That was the original reason for brokers (who bought and sold on behalf of retail clients) and jobbers (who made a market and dealt wholesale). Wise and Revolut have used technology to reduce the size of the retail versus wholesale price difference. That outcome is light years away from anything foreseen at Big Bang.

Is Wise worth 90 times earnings?

Wise (LSE: WISE), which has a March year end, put out a third-quarter trading update in mid-January. It’s enjoying strong growth, transferring over £20bn in the three months to December, up by 38% from a year ago. So far this strong transaction growth has meant reducing costs, the benefit of which it shares with customers by driving down fees, while generating cash for reinvestment.

The firm says that over the last year it dropped prices across 50 currencies and fees are now 0.60% of transaction value on average, nine basis points lower than a year ago. It was profitable in the first half of the year, to September 2021, making £19m, and analysts are forecasting profits to reach £150m in the 2024 financial year, according to data from SharePad.

Analysts covering Wise are forecasting around 24% revenue growth in 2023 and 2024, and the total addressable market for cross-border transactions is huge. There were around £2trn of global cross-border payments made by individual consumers in 2020. Around two-thirds of that is done by banks – Wise estimates that it has a market share of around 2.5%. That £2trn pool is also growing.

Like many fast-growing tech stocks, the shares look expensive. The forecast price/earnings (p/e) ratio is 90 and price/sales (p/s) ratio is 15, according to SharePad.

This approach to growing fast and sharing efficiencies with users is similar to Amazon’s. Even after 25 years of growth, the “Everything Store” now has revenue of half a trillion dollars, but shows no signs of going ex-growth. It trades on a forecast p/e of 70. In his 2005 letter to shareholders, Jeff Bezos described Amazon’s strategy in this way: “Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long-term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon”.

Wise, like Amazon, intends to expand its product offering. It recently launched a service called “Assets” for UK customers. They can now transfer balances to an index fund, while still being able to spend or transfer money overseas as though the balance were still held in cash.

There are risks to Wise. One concern is the co-founder, Taavet Hinrikus, selling 11 million shares last year, and entering a loan agreement with Goldman Sachs where up to 49.6 million shares would be pledged as security. There’s also a dual share structure common to many tech stocks. The founders hold B shares that have nine times more votes than the A shares. That lets them keep control even if they decide to cash out their A shares.

I think the bull case is relatively easy to make, but the high valuation multiples mean that if the company disappoints, then it’s likely to be punished severely. For every Amazon-style investment, there are plenty of Groupons and Pelotons that don’t receive much attention – once hyped stocks that failed to deliver.

“The credit-card model is simply unsustainable for consumers,” Klarna’s billionaire founder, Sebastian Siemiatkowski, told investors last month. They clearly agree, says Bloomberg. In a recent funding round led by SoftBank’s Vision Fund 2, the wildly popular “buy now, pay later” (BNPL) app was valued at $46.5bn. One backer, Chrysalis Investments, reckons the fast-expanding Swedish company, which first saw the light of day in 2005, could be worth $125bn in 18 months – more than Europe’s second-largest bank, HSBC.

Modelled on Sweden

Klarna’s appeal to Millennial and Gen Z fashionistas is obvious. “In the past, when I ran out of money, I simply couldn’t shop,” relates one user. No such worries now. Unlike credit-card firms, the Nordic fintech doesn’t charge its 90 million users hefty interest payments and fees; it makes most of its money from retailers, who have embraced the “simple pink-coloured” app with gusto. “Don’t wait until payday hon,” Boohoo urges its youthful customers. “Boohoo accepts Klarna.” No wonder everyone wants a piece of the BNPL action. Twitter founder Jack Dorsey’s payments platform, Square, recently paid $29bn for Klarna’s Australian rival, Afterpay. The UK contender, Zilch, has raised more than $200m from Goldman Sachs and the venture-capital arm of the Daily Mail & General Trust.

Siemiatkowski, 39, “credits an unlikely backer for his runaway success”, says Reuters: “the Swedish welfare state”, in particular, a late 1990s government policy to put a computer in every home – a transformative move “for low-income families such as mine”, he says. Sweden’s prescient connectivity drive helps explain why its capital Stockholm has become “such rich soil for start-ups”, incubating the likes of Spotify, Skype and Klarna. Siemiatkowski himself began coding on the family computer when he was 16. Born in 1981 to Polish immigrants – his parents were impoverished former academics who put huge emphasis on education – he grew up in Uppsala and was a high achiever at school, prone to devouring Richard Branson’s business books.

Siemiatkowski paid his dues while studying for a masters at the Stockholm School of Economics, “putting frozen meat onto a conveyor belt” at Burger King, says Forbes. On the other side of the assembly line was Niklas Adalberth. The two became friends and co-founded the startup (originally known as InvoiceMe) with a third student entrepreneur, Victor Jacobsson, in 2005. Investors then didn’t get the concept. “We presented our idea at an innovators’ pitch and they said: ‘Forget about it.’” But soon after Siemiatkowski got the thumbs-up from an observer at the session. “Just go for it. The banks will never understand what happened.” “I’m still on that mission,” he says.

The mission to take the US

Having swept through Europe, Klarna is now aggressively targeting the US market amid talk of a Wall Street float early next year. But its ascent hasn’t been exactly “frictionless”, says Elle magazine. Some charge that Klarna is a “modern-day loan shark” – made all the more dangerous by its innocuous image – enabling addicted young consumers into taking on large amounts of debt. The BNPL market more than trebled in size in 2020 and Britain’s Financial Conduct Authority has called for it to be “brought within regulation” – a move that might cramp the style of Klarna’s jejune users, says Bloomberg, who are becoming relaxed about buying stuff they can’t afford. It’s the insouciance that worries regulators most.

Last year HSBC took “billions of dollars” in loan losses, say Stephen Morris and Tabby Kinder in the Financial Times. Now it has announced an “almost fivefold rise in second-quarter earnings as the global economic outlook brightened”. Pre-tax profits “surged” from $1.1bn last year to $5.1bn in 2021, while the group “cancelled a further $300m of credit provisions”.

HSBC’s decision to reinstate its dividend is “another good sign” for shareholders, says Jennifer Hughes on Breakingviews. However, the fact that it is handing back “a mere seven cents a share for now”, suggests that HSBC’s management think that things are “only slowly moving in the right direction”. The payout, worth far less than half the group’s earnings, is pretty “meh” when set against UK rivals Barclays and NatWest. And while HSBC is saying that it will now “consider” buybacks, shareholders “shouldn’t hold their breath”. Don’t expect any major share-price rises either, says Emma Powell in The Times. Part of the problemis HSBC’s focus on Asia. In theory, it implies “arguably the greatest growth potential of any of the big five banks listed on the LSE”, since the region benefits from “an ascendant middle class and rising demand for wealth-management services”.

But the share price remains depressed by “geopolitical concerns”, especially the “fragile relations” between the West and China and Hong Kong, which account for half of its profits. HSBC is still feeling “intense heat” over its support of the national-security law that China imposed on Hong Kong.

Lloyds Banking Group has “poached” HSBC’s Charlie Nunn to be its next CEO, replacing outgoing boss António Horta-Osório, “one of Britain’s best known executives”, say Harry Wilson and Stefania Spezzati on Bloomberg. This reinforces Horta-Osório’s strategy of making a “bigger push into managing money for individuals” in order to diversify the bank’s revenue: Nunn is HSBC’s head of wealth and personal banking.

Lloyds shouldn’t assume that boosting sales by expanding wealth management services is a surefire route to success, says Lex in the Financial Times. Even if it does become one of the top three providers in the UK, it will be “tough” to make a lot more money from it given that fees in the industry are in long-term decline and top-quality wealth managers “remain costly”. Meanwhile the bank will have to deal with the effects of Covid-19, which has wiped out “the income equivalent of 40% of the past year’s cost base”. Given these problems, “a recovery to pre-pandemic levels of business” may be the best it can hope for.

An opaque transition process

The situation is also complicated by the fact that despite the supposedly “rigorous” selection process, Lloyds is not only unable to say “when Nunn will actually be joining” but also “remains unsure as to when Horta-Osório is off”, says Ben Marlow in The Daily Telegraph. It has already admitted that “there may be a period where neither of them are running it”, with chief financial officer William Chalmers stepping in as an interim CEO. Still, maybe Lloyds shareholders should be thankful that Horta-Osório isn’t staying on forever. The share price has halved since he took over.

The delay won’t stop Nunn from having to deal with some potential public-relations disasters next year, says Kalyeena Makortoff and Julia Kollewe in The Guardian. Chief among them is the fallout from a £245m loans scam run from the Reading branch of HBOS, which Lloyds took over in 2009. While six of those involved in the crime have been jailed, Lloyds is “still trying to complete a compensation programme” and is awaiting the results of an inquiry into allegations of a cover-up. Nunn is also likely to face continued criticism over his pay, even though it is lower than Horta-Osório’s package, which prompted “stinging criticism” from MPs.

Good public relations is particularly important given that Lloyds, like other banks, faces a nasty dilemma thanks to the “pile of bad debts” from the various emergency-loan schemes, says Katherine Griffiths in The Times. While the government made it clear that it would guarantee the loans, the terms and conditions require lenders to “try to recover them before they can claim on the guarantees”. But if they push too hard for repayment, they face a “public backlash”. Either way, Nunn can expect “uncomfortable” public appearances before the Treasury select committee and “behind-the-scenes pressure” from ministers about how to treat customers.

An unexpectedly steep plunge in earnings, with first half pre-tax profits falling by 65% to $4.3bn, has prompted HSBC to announce that it will “accelerate” the axing of 35,000 jobs, says the BBC. The bank says bad loans linked to the coronavirus could reach $13bn (£9.8bn) as more people and businesses are now expected to default on their repayments because of the pandemic. HSBC has granted more than 700,000 payment holidays on loans, credit cards and mortgages. It has also been hit by low interest rates, which squeezes profit margins on the loans it provides.

The job cuts are likely to end up going even further, says Liam Proud on Breakingviews: the investment banking business is the only part of HSBC “that’s really growing”. However, not only is investment banking “hardly a dependable earner”, but its “stellar” performance also can’t offset a “slump” in retail and commercial banking revenue. This leaves cost reductions as “the only lever available” to help HSBC achieve its goal of a 10%-12% tangible return on equity by 2022. CEO Noel Quinn will need “much more” than the 7% year-on-year reduction he’s already achieved.

A bigger headache than Covid-19

HSBC’s size means that it has been in the “eye of the Covid-19 storm” and has been hit particularly hard by government pressure to “support struggling businesses and stretched households”, says Ben Marlow in The Daily Telegraph. Still, in terms of HSBC’s long-term direction, Covid-19 is almost a “sideshow”, since the process of navigating “rising tensions” between Washington and Beijing is providing it with an “even bigger headache”.

There is “no easy fix” for the geopolitical predicament HSBC finds itself in, says Alistair Osborne in The Times. But the decision of its Asian head Peter Wong to sign a petition backing China’s intervention in Hong Kong has “cranked things right up”, as well as alienating its customers in Hong Kong, which currently account for a large chunk of profits. With the bank looking “too big to manage” a breakup seems increasingly attractive, especially as the “pretence” that HSBC can “breezily” operate in markets that “politically collide” has “slipped”.

Still, at least HSBC’s shareholders can console themselves that they are not alone in their misery, say Harry Wilson and Stefania Spezzati on Bloomberg. Write-offs at the UK’s six biggest banks so far this year “roughly equal Barclays Plc’s current market value”.

For example, Lloyds expects to set aside “between £4.5bn and £5.5bn pounds this year”, while Barclays has taken a £1.6bn impairment charge. More misery may be coming with Deutsche Bank estimating that UK banks “might book as much as £40bn in provisions over two years”. No wonder shares in HSBC, Barclays, Lloyds and NatWest “have all performed worse than their European peers this year”.

Tesco Bank has left the mortgage market by selling its £3.7bn loan book, says The Daily Telegraph. This is in line with a strategy to "slim down the number of services and products it offers to reduce costs". The 23,000 customers will be moved to Halifax, a subsidiary of Lloyds.

While supermarket banking services "were once seen as a credible threat to the dominance of major high-street banks", tighter regulation in the mortgage market and a series of digital-banking apps geared towards winning over younger customers have hampered supermarkets' financial divisions.

The deal is the latest sign of the "convulsions gripping the UK's mortgage market", says Ben Martin in The Times. These have been caused by post-crisis regulations forcing banks to separate legally their investment banking arms from their high-street businesses.

As a result, the capital that lenders with a global presence would previously have been "free to put to work across their businesses" is now "locked in their domestic divisions". This in turn has encouraged large banks such as HSBC and Barclays to put the money into mortgages, creating "intense competition" that has hit the margins of firms such as Tesco Bank.

Margins in mortgage lending are so low that although the loans were bought at a premium of 2.5%, Lloyds claims that they "would still produce better returns than issuing new loans in current market conditions", says Nicholas Megaw in the Financial Times. It is hardly surprising, then, that Lloyds was not the only bank to bid for them.

British banks have been in the news for all the wrong reasons. We have seen queues outside Metro Bank, and it recently emerged that the Bank of England tried to prevent the prosecution of executives at Barclays for not disclosing the funding the bank received from Qatar during the financial crisis.

Stock returns have also been disappointing, with HSBC, Barclays, RBS, Lloyds and Standard Chartered all lagging the stockmarket over the last decade. However, look beyond the headlines and you will see that the major listed British banks have been grappling successfully with the legacy of the financial crisis, putting their houses in order in advance of any economic downturn, fending off competition from challenger banks, and getting down to the important task of growing revenues and profits.

Recovering from the financial crisis

Concerns that British banks haven't properly dealt with the legacy of the financial meltdown of 2007-2008 are clearly having an impact on the sector. Even though the crisis was over a decade ago, "it has taken a long time for the public to forgive the banks for what took place in 2007-2008", says David Miller of Quilter Cheviot Investment. Recurrent negative publicity over various cases of misconduct, notably the scandals over the fixing of Libor (a key interbank lending rate) and the mis-selling of payment protection insurance (PPI), have hardly helped.

Still, the good news, according to Miller, is that "there's a big difference between how British banks are perceived by the public and how they are regarded by their peers and compared with institutions in Europe and America, British banks have a good reputation". For example, regulators have forced them to increase the capital set aside to cover losses on loans. The buffer between assets and loans is far higher than the rules stipulate.

The average Tier 1 capital ratio (a key gauge of financial strength measuring equity capital as a proportion of overall assets) has more than doubled since the crisis to 18% today; the regulatory minimum is 10.5%. This means that banks could still survive even if the value of their assets fell by nearly one-fifth. More generally, there's been a "dramatic change" in the culture, which means that "they are now run in a much more prudent way".

Less legal hassle

The huge amount of money that British banks have paid out in fines and settlements may not have been good for their bottom line, but at least it means that the remaining legal risk has "greatly diminished", says Simon Gergel of Merchants Trust. Even though there is still a chance that there could be a surge of PPI claims in the run-up to the deadline (29 August), banks are "getting to the end of the process". While legal risk "will never completely go away", much tighter compliance means that "the potential losses from fines and lawsuits should be significantly lower than they were before".Of course, there are still "pockets of concern", such "as loosening credit standards" in unsecured store-cards and zero-percent balance transfer cards, says Philip Matthews, co-portfolio manager of the TB Wise Multi-Asset Income Fund. However, balance-sheet quality "appears to have been demonstrably improved".

Overall credit standards have also been tightened, "considerably reducing the riskiness of the assets held on banks' balance sheets". Far fewer high loan-to-value mortgages have been written compared with ten years ago. Banks have retained less of their leveraged loan exposure on their own balance sheets. The average unsecured loan exposure is lower and the banks have "pulled back from very high risk commercial real-estate lending".

Liquidity, meanwhile, has vastly improved. One of the key causes of the crisis was that banks moved away from relying primarily on customers' deposits to meet short-term obligations and instead started to lean on external money markets. Indeed, just before the crisis started they typically had only enough liquid assets, such as cash and short-term debt, to cover six weeks' worth of funding. This caused huge problems when the money markets suddenly dried up from the summer of 2007 onwards. By contrast, today they have "sufficient liquidity to cover two years of wholesale funding outflows", says Matthews.

Well prepared for a slowdown... if one comes

Investors also shouldn't worry too much about the possibility of a slowdown hitting the banking sector, reckons Gergel. The changes that the banks have been forced to make will ensure they are well prepared.

From the start of last year, the Bank of England has forced banks to follow new global accounting standards that require them to make provision for any potential losses in advance of any downturn rather than as it happens. This should pre-empt nasty surprises for investors and temper concern over systemic problems once a downturn arrives. While such provisions are currently having a negative impact on banks' balance sheets, it looks as though it will be "relatively minor".

Besides, there is no guarantee that the recession many people are expecting will actually take place. Even the potential impact of Brexit has been overstated. While the potential loss of the right to sell financial services across the EU will affect investment banks, it will have scant impact on retail banks. It's also important to remember that HSBC and Barclays are global banks with offices and operations around the world. So neither Brexit disruption nor a British downturn will particularly hurt their bottom line.

A Brexit boost?

What's more, if Brexit ends up being softer than expected then a great deal of pent-up demand will be released, boosting the economy and banks' balance sheets. "We've been living with Brexit for three years, so banks have had plenty of time to prepare for the worst," says Miller. Indeed, as part of the new, tightened regulatory regime, banks are regularly required to undergo "stress tests", which examine the effect a recession or a sudden drop in house prices has on their balance sheets.

All the major banks have repeatedly passed the tests, which suggests that a slowdown should be relatively easy for them to deal with. Rather than worrying about an economic slowdown that may never occur, investors should be more concerned by the fact that the Bank of England's enthusiasm for interest-rate rises seems to have dissipated. Higher interest rates are generally good for banks because they can earn more on their loans.

However, interest rates could rise unexpectedly quickly if inflation suddenly picks up a scenario that could take central banks by surprise, as we have often pointed out over the last few months.

Challengers' challenge overstated

British banks have also had to deal with new competitors. Since the crash, several "challenger banks" have emerged that aim to steal business from the incumbents. The government has encouraged the newcomers, such as Metro Bank, on the principle that increased competition will force existing banks to offer better service and more value for money. Two years ago RBS announced that it was setting up two funds, with a total value of £775m, to make it easier for small businesses to switch to challenger banks, as well as to encourage financial innovation more generally.

But while it would be wrong to write off the newcomers, the evidence suggests that the challenge they pose to the main players has been overstated. The recent turbulence at Metro Bank indicates that banking "is a matter of confidence and scale, so the challenges are more towards the newcomers than the big four", says Helal Miah, investment research analyst at The Share Centre.

Matthews believes they don't pose a significant challenge to the big players. After all, challenger banks "have disadvantages of their own... rapid levels of growth bring with them operational issues, as well as potential credit issues" if an unexpected economic downturn materialises.

Co-opting technology

A more significant long-term threat to the established institutions comes from financial technology (fintech) companies, which aim to use software or artificial intelligence to steal business from banks or make them obsolete. "We are in the middle of a wave of technological disruption," admits Georg Ludviksson, founder and chief executive of software company Meniga, which helps retail banks in the UK and Europe deal with the impact of technological change.Still, investors in the big institutions should be reassured by the fact that they are working extremely hard to stay on the cutting edge of technology, so that if there is a technological revolution, they are not being left behind. Indeed, not only are the main banks "fighting back by copying what the challengers are doing", but they are also "taking the initiative". Certainly, "all the banks realise that where technology is concerned they have to move faster and change", and as a result "most of them are making a lot of progress".

In fact, technological change in banking could end up helping big British banks more than it hurts them. Ludviksson points to the example of telecom firms such as Three, which have used the power of their brands to reinvent themselves as sales and marketing powerhouses, allowing them to outsource more capital-intensive, lower-margin tasks.

In that scenario, the big players could end up partnering with fintech firms to focus on those parts of banking that are more profitable. Even in the worst-case scenario, the traditional banks are hardly going to be supplanted in the near future. The fintech sector will only succeed by concentrating on niches "and then scaling up". It should avoid trying to "replicate everything that banks currently do".

Returning to profitability

Not only are the fears surrounding the British banking sector overblown, but there are also some compelling positive reasons for investing in it. Having absorbed nearly £100bn of costs, banks "are much better positioned to pay dividends or undertake share buybacks", says Matthews. Despite intense competition, traditional retail-banking activities remain highly profitable. One particularly lucrative area is mortgages, "with new business generating returns well above the cost of capital". This has been especially good news for Lloyds, which has used its strong focus on these bread-and-butter areas to generate "strong" returns on equity.

Things have been a little more complicated for the corporate and investment banking divisions of the major British banks. One of the big problems is that investment banking is a much more global industry, which means that British and European firms are competing "against large-scale US banks with less punitive regulatory regimes". The investment banking divisions of RBS and Barclays are "well off their return aspirations", leading to calls for Barclays to spin off its investment-banking arm. However, both banks are having some success in cutting costs, which should make it easier for them to boost margins and return on capital.

There are some other potential areas of growth that banks are starting to explore. A greater emphasis on investment advice and financial products that will help people plan for the future should pay dividends. "It's clear that people are being expected to take more responsibility for their own financial security, so if you can offer good advice then you are in a good position," says Miller. He also notes that banks such as HSBC, which derives most of its revenue from outside the UK, have an opportunity to expand this business in fast-growing areas of the world, such as Asia. Standard Chartered, another global player, has the same opportunity.

A sector for income seekers

One indication that the British banking sector is in much better shape than it was a few years ago, and has finally put the legacy of the great financial crisis behind it, is the increase in the level of profits. According to data from The Share Centre, last year the listed UK banks made a collective profit of £27.7bn, nearly triple the levels of £9.5bn five years ago. While this is still below the record level of £34.4bn in 2007, dividends have also increased sharply from £7.7bn to £11.6bn during the same period. The combination of falling share prices and rising profits has resulted in enticing dividend yields, especially compared with other industries.

The banking sector's best bets

HSBC (LSE: HSBA) is the largest UK bank by market capitalisation, and one of the largest banks in the world. The fact that it derives 85% of its revenues from outside Britain means that it should be insulated from any downturn in the UK economy and should also benefit from growth in emerging markets, especially in Asia. Despite this, it still trades at only 11.2 times 2020 earnings and yields an attractive 6%.

One British bank that should also benefit from growth in emerging markets, but is trading at a much bigger discount than HSBC, is Standard Chartered (LSE: STAN). Around 90% of Standard Chartered's revenues come from the Middle East, Africa and Asia, giving it exposure to some of the fastest-growing parts of the global economy. Its increasing profitability has enabled it to announce that it will spend £770m buying back shares. It trades at a discount of 47% to its book value and offers a dividend yield of 3%.

Barclays (LSE: BARC) is in the middle of a public row between activist shareholder Edward Bramson who wants either to shut down or divest the investment banking division and chief executive Jes Staley, who opposes such a move. Staley seems to have won the argument for the moment and has made some changes designed to give him more direct control of the division. More broadly, Simon Gergel of Merchants Investment Trust thinks that Staley is doing a good job of cutting costs and reducing the level of debt. Barclays trades on a 2020 price/earnings ratio of 6.5, with a dividend yield of 4.7%.

Lloyds (LSE: LLOY) was one of the banks, along with RBS, to receive a bailout from the government. It resulted in the Treasury taking a 43% stake in the company. However, two years ago the final tranche of government shares in the bank were sold, which means that is now completely free from government interference.

David Miller of Quilter Cheviot Investment believes it's made "good progress" in pushing through the structural changes needed for the institution to prosper, as shown by the 8% return on equity, a key gauge of profitability. It currently trades at a yield of 6%, and said that it now feels confident enough to start paying dividends quarterly rather than annually.

One challenger bank worth considering is CYBG (LSE: CYBG), which was formed when National Australia Bank decided to sell off Clydesdale Bank and Yorkshire Bank and float them as a separate company. Last year, CYBG bought Virgin Money (which owned Northern Rock), which should help increase its asset base and diversify its business away from mortgages.

While it unexpectedly failed to gain any money from the banking competition fund set up by RBS (it went to Metro Bank), management has promised to outline a detailed medium-term plan for growing the bank. CYBG trades at 7.3 times 2020 earnings and yields 3.7%.

If you're asked to picture a private bank, the things that spring to mind may be marble halls, subterranean vaults, hushed voices and perhaps Swiss accents. Today's private banks are, of course, more high-tech but the reasons for people using private banks don't seem to have changed much over the years. Some might use a private bank because they consider it to be prestigious; some might want the high-class service; while others like the perceived discretion.

As the word "private" implies, this type of bank has long held a reputation for privacy and secrecy. Although much of this has changed since the cultural shift towards a more transparent digital-banking system, some banks remain strictly private. As the PR person of one well-known bank told me, "the nature of the discreet relationships we have with our customers means we don't disclose information on levels of wealth or services", and therefore have "no wish to appear in your article". But is being a client with a private bank worth the high fees, or is it simply a tax on snobbery?

Banking for the affluent

The boundaries of private banking can be tricky to pinpoint. In the most traditional sense, private banks are independent banks that were originally family run and founded in the 17th or 18th century, such as Weatherbys or C. Hoare & Co. But today, many high-street banks such as Lloyds, HSBC and Barclays provide "premium banking" or "private banking" services.

What these private banks have in common, though, is the requirement for customers to be sitting on a certain amount of money. At Brown Shipley, private clients need to have "investable assets" which means money that is not tied up in your main residence of at least £500,000. At Arbuthnot Latham you need to have investable wealth in excess of £1m. Coutts' clients have to invest or bank about £1m, or earn half a million a year.

At the private-banking arms of high-street banks the threshold is lower. To qualify for HSBC Premier, you need to have savings or investments of at least £50,000 with HSBC in the UK; or an annual income of at least £100,000, in conjunction with a mortgage of at least £300,000, or another product taken out through its financial advisory service. At Lloyds, customers typically have at least £250,000 in savings, investments or personal pensions, or a sole annual income of at least £250,000.

If you're considering going to a private bank, it helps to know what level of service you can expect. Some private banks, such as Brown Shipley and Arbuthnot Latham, can offer a wide range of advisory services, including advice on tax-efficient investments, estate and inheritance-tax planning, pensions and investment management. "We use cash-flow forecasting to demonstrate to clients how they will be able to fund their future," says Liz Bottomley of Arbuthnot, when asked how it compares with high-street banks' private services. "We spend time with our clients to really get to know them and we continue to offer a high-touch personal service throughout our relationship. We are not bound by the constraints of a box-ticking approach."

Private banks: Four Seasons versus the Premier Inn

For some, the appeal of private banking lies in other perks. "Clients like being in the club'," says Stuart Newey, head of banking at Coutts, comparing the bank to a private members' club. The bank is beginning to host more events where clients can network with each other. Coutts was established in 1692 and has provided the royal family with banking services since Queen Anne's reign although as Newey points out, "We have a network of entrepreneurs not just royalty". Today Coutts is part of the RBS group. It provides banking, lending and investment services, including early-stage investment opportunities and wealth services relating to inheritance tax, philanthropy and the running of a family business. The bank also provides financial education for clients' children after all, "80% of wealth doesn't reach the third generation", says Lenka Setkova, head of Coutts Institute.

Unsurprisingly, Coutts' services are geared towards a certain type of customer. For example, "If a client buys a car in a showroom, it's not a problem", Newey explains in contrast to retail banks, which have more constraints when it comes to transactions involving large sums. Similarly, if clients travel, they don't need to ring up the bank to warn Coutts they're going abroad. Another advantage is that Coutts can easily cope with clients' complex financial histories. At a retail bank, Newey argues, "you get the same fraud profiling, and you're using the same phone lines as everyone else". At Coutts, an online algorithm recognises whether it's the client who is using online banking by how they use their keyboard, how they swipe and what language their phone is set to. As Newey puts it, describing the difference between the high street and traditional private banks, "The Premier Inn and the Four Seasons both provide a bed you can sleep in, but the latter knows what settings you like".

As the range of private-banking services increases, so do the fees. That said, charges vary widely across the industry, says Lee Goggin of FindaWealthManager.com. Some banks will charge 1.75% of assets under management, says Goggin. While it's hardly bargain-basement levels, it may well be significantly lower than you might be charged "by an independent financial adviser, who will often outsource the management of portfolios to a wealth manager and then charge a hefty premium on top for their advice", he says. Unfortunately, it's not easy to compare costs many private banks only specify fees upon application, and there are no "comparison sites" for private banking. However, as an example of what to expect, at a more basic level, for a "sole banking relationship" at Coutts you can expect to pay an annual tariff of £900, charged quarterly, while C. Hoare & Co. charges £60 a month for each current account held, though these fees can be waived if you hold more than a certain minimum amount with the bank in question.

High-street banks get in on the action

Even if you decide just to use the private-banking service of a high-street bank, the expectation is that you will still get better service than if you pop into a branch at lunchtime to pay a bill. At HSBC, for instance, you get a "dedicated relationship manager". At Lloyds it's an "advice manager" who can help clients draw up a financial plan, providing advice on areas including investments, planning for retirement, wealth and inheritance tax.

Challenger banks have also moved into the private-banking sector. Metro offers a private-banking service to those with £1m of assets or borrowings with the bank, which can include a mortgage. "We don't do investment advice or insurance sales," says Julie Barnsley, head of private banking at Metro. "We just do the banking bit" which includes current accounts, savings, mortgages and loans, coupled "with an old-fashioned relationship service". Its managers are recruited from other private banks, and they have around 40 to 60 customers each. For an entrepreneur, a manager might oversee their personal banking and that of their family, the trading of the business, and the lending for a portfolio of properties.

This certainly sounds a far cry from the anonymous treatment and sometimes garbled responses I get as a normal client with my bank. The closest I came to premium treatment was when my mortgage adviser was 30 minutes late to an appointment and promised me a bottle of wine and chocolates as an apology. They never arrived.

So should you use a private bank?

This is probably the key attraction of a private bank the relationship. Indeed, when a 2015 Deloitte survey with private banks and wealth managers asked what would most differentiate their institution from others in the next five years, the overwhelming majority answered: "client relationships". "In many cases, when clients leave an institution, it is because of a lack of understanding with the relationship manager and not investment performance," reported the survey. So if you're looking for a personal manager for your finances, for a one-stop financial shop, or you're keen to network at client events through your bank, then private banking might be for you provided you can afford it. But otherwise, these services could be unnecessarily expensive. If you take a more hands-on approach with your finances, or if low cost is your first priority, it might be better to give it a miss.

Energy may not be dominating the headlines at the moment, but many experts believe that, unless something is done, Britain faces looming shortages.

To look at how EU membership has affected UK energy policy, and how Brexit could change this, we've decided to turn to Clive Moffatt, one of the leading experts on the economics of the sector. Moffatt is head of consultancy and market research at Moffatt Associates, and has advised everyone from HSBC and GE to the EU Commission on energy. He currently heads up a coalition of UK energy companies that want to raise awareness of the looming problems.

The popular perception is that Brussels has always imposed regulation over the heads of an unwilling UK government. But this was not always the case. In the 1980s and 90s, "the UK energy market was regarded as the model for the rest of the EU", says Moffatt. For example, Britain "led the way on de-nationalisation, the removal of price controls, the establishment of an independent transmission network, the launch of retail supply competition and the creation of an independent industry Regulator". However, member states "have been reluctant to let energy policy slip from their grasp" so "the vision of a single energy market is very unlikely to be realised".

How the EU has shifted the goalposts

Over the past two decades, European policy has shifted from liberalisation to focusing on cutting carbon emissions. In pursuit of these targets, "member states have often pursued individual and often conflicting policies such that across the EU, markets have ceased to function". Meanwhile, "a myriad of subsidies and penalties has led to a huge hike in energy costs for all consumers". Indeed, Moffatt thinks that the "ambitious" targets to cut CO2 emissions by 80% from 1990 levels by 2050 that were agreed by all EU governments in 2008, "may need to be postponed and much greater emphasis placed on ensuring security of supply and minimising the cost".

As well as setting unrealistic targets, Brussels has tilted the playing field towards wind and solar, which have low marginal costs. In practice this means that, "the wholesale electricity market no longer generates high enough prices over a long enough timespan to support any new investment in gas or nuclear generation", argues Moffatt. As a result, "no new generation of any kind can be built without some form of government intervention". In contrast, says Moffatt, Brexit will "allow the government to adopt a more cohesive and longer term approach to the question of subsidies and CO2 pricing which is in the best of interests of the environment, industry and consumers".

The situation is further complicated by state aid regulations, "which mean that governments cannot distinguish between different types of generation or be seen to favour new over old technology". Under the current system, old gas, nuclear and coal plants get generous payments for shutting down, but cleaner and more efficient gas plants still find it uneconomical to produce enough to make up for the lost output and "keep the lights on when the wind is not blowing or the sun is not shining". If these rules were relaxed, Moffatt believes, the UK would be able to invest in enough diesel and gas generation to fill the gaps.

But it's not all Brussels' fault

Of course, Brussels can't be blamed for everything. While it is an "inescapable fact" that renewable energy is more expensive that conventional sources, the UK government has chosen to push most of the cost onto industry, rather than follow Germany, which has shielded its firms. Still, Brexit will allow the government to devise "a fairer and longer term period of adjusting to a low carbon economy" by reforming the capacity market and "placing less emphasis on direct subsidies for renewable energy". Combined with tax breaks for heavy industry and poorer consumers, this would "help restore the role of the market in energy policy, an approach that has to date been constrained by EU rules" says Moffatt.

Moffatt accepts that by itself, Brexit won't solve our problems, as the struggle "to square the circle of low emissions, security of supply and affordability will continue". Indeed, "the EU Single Energy Market sets down cross-border trading codes and standards and it would be sensible to keep these in place so that gas and power can be traded on the same basis either end of the pipeline". If we leave the single market "then alternative trading arrangements will need to be put in place with Norway, Belgium, Ireland, France and the Netherlands".Similarly, any post-Brexit immigration restrictions must not worsen the current shortage of engineers.

What leaving the EU will do is "remove the current restrictive measures and release our ability to devise the best mix of policies" including needed reforms that "restore the operation of the UK energy market". There is no reason to be pessimistic about our ability to turn things around, says Moffatt, when you remember that we originally "led the way with energy market reform".

The result of the EU referendum led to dramatic falls in both the FTSE 100 and the FTSE 250. However, while the FTSE 100 quickly recovered, the FTSE 250 is still markedly down. So which index should we be looking to for the most accurate gauge of the health of the British economy?

The stocks in the FTSE 100 are the largest UK-listed firms. Many are global companies that have the majority of their operations and sales outside the UK. For example, HSBC, which accounts for 5% of the index, is a familiar presence on the high street, but the UK accounts for less than a quarter of its assets and revenues. Overall, less than a third of total profits for FTSE 100 stocks come from the UK. What's more, the index is skewed heavily toward certain sectors. BP, Royal Dutch Shell and British Gas account for 12.3% of the market, even though oil and gas is just 2% of the UK's GDP. Banks, insurance companies and other financial services (which account for 10% of value added and 4% of jobs in the UK economy) make up 20%.

The FTSE 250, which includes the 250 next-largest stocks, is much more focused on the domestic economy. The top ten constituents include firms such as online estate agents Rightmove and the property developer Bellway, both of which will be deeply affected by economic developments here. There are still international firms in the index: the largest constituent, Smiths Group, gets only 4% of revenue from the UK. And the skew towards certain sectors remains.Energy is a much more realistic 3%, but financials account for nearly 35% of the index. However, the FTSE 250 is a better overall barometer for the UK economy.

The FTSE 250 tends to be more volatile than the FTSE 100: not only has it suffered more in the aftermath of the referendum, but it was also hit harder by the 2008 crash. But over the long term, it has done much better. Investing £100 into the FTSE 250 three decades ago would have left you with £2,415 today, compared with £1,225 for the FTSE 100. This amounts to an annual return of 11.2%, compared with 8.7% for the FTSE 100. This is consistent with an extensive body of research that shows that smaller firms tend to deliver higher returns than their larger counterparts.

Lastly, what of the FTSE All-Share index? This includes the constituents from the FTSE 100 and the FTSE 250, as well as smaller companies, so it should be the broadest measure of the market. However, the size of the FTSE 100 companies means that they account for 80% of the overall market cap, so the performance of the FTSE All-Share (and also of the FTSE 350, which includes FTSE 100 and FTSE 250 stocks) is very similar to that of the FTSE 100.

Gi Fernando's path to becoming a technology entrepreneur was long and unconventional. When he graduated from university in 1992, "there really wasn't a technology industry", he says. So he initially drifted from project to project, including selling health insurance door to door and travelling the world, before joining HSBC in 1995. He spent almost five years at the bank and oversaw a number of technology projects, including the integration of HSBC's systems with other companies that it had taken over.

However, Fernando was always interested in entrepreneurship, so he left in 2002 to set up Western, a company focused on helping businesses use digital technology in their marketing.

Western was a moderate success, but the breakthrough moment came one day in 2007. Fernando, who had recently been exploring Facebook at the urging of his teenage nephew, was having a drink with barrister and technology entrepreneur Ankur Shah and another friend, and began discussing how digital technology was transforming advertising.

This friend bet Fernando and Shah £6 that they couldn't build a digital services company and get a paying client within five days. Taking up the challenge, the duo founded Techlightenment and won a £20,000 contract to build a Facebook app for a marketing campaign one day ahead of the deadline.

In its early days, Techlightenment faced two main problems. One was securing banking facilities. Techlightment's main business revolved around an automated platform that allowed clients to buy Facebook advertisements easily, but Facebook would only accept credit cards. So Fernando and his co-founder had to take out a lot of cards and move large sums of money between them.

This set off fraud alerts, which meant the duo initially struggled to find a bank willing to work with them. The second difficulty was recruitment. With business "growing like a weed", they had to recruit 16 people within six weeks. To tap into the pool of top talent they sponsored the first Facebook Developer Garage, a decision that Fernando believes greatly helped them find suitable staff.

The new company faced its first serious competitor within six months, aftermarketing agency TBG moved into the digital arena. But this was a welcome development, says Fernando; the arrival of an established firm "made the entire area we were working in seem much more credible". Regardless of the added competition, Techlightenment continued growing: within four years, annual turnover would be more than £10m. In early 2011, Fernando and Shah sold a majority stake in Techlightenment to Experian for "tens of millions".

The following year Fernando left the business, and has since become an active tech investor, backing around 30 ventures. Inspired by the problems he had faced finding staff for Techlightenment, he founded Freeformers in 2012. This company recruits young people and then turns them into trainers to help businesses understand social media and digital marketing.

He believes that a large number of people under the age of 25 have considerable skills in these areas, which are not captured by the formal qualification system and says that British firms must value these skills if the country is to remain competitive.

Fernando's advice for other tech entrepreneurs is to "find something that you love, but which is unique". You'll need an idea that can transform that sector, but this doesn't need to be complex. For example, he helped encourage one group of 14-year-olds from a farming community to develop an app that let farmers log information about livestock more efficiently. Unsurprisingly given his background, he also advises entrepreneurs not to neglect marketing. "You can't see selling as some sort of dirty thing," he says.

Overpaying your mortgage is generally a good idea. In fact, it's possibly one of the best investments you can make.

And now could be a particularly good time to do it. Given the low rates available on cash savings, we think that paying extra to your mortgage is a very under-rated long-term savings plan, particularly if you are feeling wary of investing.

And with mortgage rates set to go higher - several mortgage providers have hiked their standard variable rates (SVRs) in recent weeks, and more are likely to follow - it's becoming even more attractive.

Why mortgage rates are rising

Mortgage rates typically move in tandem with the Bank of England's base rate. So with the base rate unchanged at 0.5% for the last three years, why are mortgage rates going up now?

It's down to the way that mortgage providers are financing themselves. In recent weeks we've sung the praises of HSBC and Standard Chartered for their sensible finances.

These banks still stick to a basic rule of not lending more to borrowers than they take in from savers. Unfortunately, most UK mortgage providers aren't financed like this.

Have a look at the chart below. The purple shaded area shows the amount of lending to the UK private sector. The red shaded area represents the amount of deposits by private sector savers.

As you can see, there is a big gap between the two. This gap has to be filled somehow. Many banks and building societies have chosen to plug the gap with short-term wholesale finance from the international money markets.

The problem with this type of finance is that its availability and cost (the interest rate charged) moves about a lot. We saw this in 2007 when Northern Rock - which aggressively financed itself with wholesale finance - literally ran out of money as the financial crisis developed.

Nervousness about the eurozone and the health of the banking sector has seen interest rates on wholesale finance tick higher over the past year or so. This is bad news for mortgage providers - and for mortgage holders.

Bank & building society retail funding gap

Source: Bank of England

Mortgage providers are only too aware of this funding gap' and are trying to do something about it by raising more deposits from savers. But this has made the market for savers more competitive, particularly on products like fixed-term savings bonds and cash individual savings accounts (Isas).

So to entice savers, banks have to offer higher rates. This in turn again pushes up costs for banks and these costs are being passed on to borrowers in the form of higher mortgage rates.

This may seem like madness given that so many households are struggling to meet their monthly mortgage payments. It probably is, but banks can only cut so many costs.

Banks such as RBS and Lloyds have so many risky loans they need to boost profits in order to offset the potential losses from the loans that go bad. Whether this pushes more households over the edge remains to be seen.

What can you do about it? Pay off your mortgage earlier

One of the obvious responses to rising mortgage rates is to fix or cap your interest rate for a period of time. There are some good deals about.

For example, HSBC will lend at 1.89% above the Bank of England base rate for the term of your mortgage, or at 1.99% fixed for two years. The only drawbacks are that you need a deposit of 40% (or minimum loan-to-value of 60%) and have to pay arrangement fees of £1,499 and £999 respectively.

If you have some spare cash, an alternative is to overpay your mortgage. In fact, for many people, it probably makes more sense to prioritise repaying your mortgage over investing in a pension plan.

The returns from doing so are very compelling, and make mortgage overpayment a viable investment plan in its own right.

Have a look at the table below.

Source: company websites

What the table shows is the current SVRs of the major mortgage lenders and the equivalent pre-tax savings rates for 20% and 40% taxpayers. The great thing about overpaying your mortgage is that you don't pay tax on the interest savings. This is not the case for most savings accounts (except Isas).

As a rough rule of thumb, if your mortgage rate is higher than the after-tax rate you are earning on your savings, it makes sense to pay off your mortgage rather than have your money in a savings account.

Admittedly, Halifax's five-year fixed-rate cash Isa of 4.5% could be good value here (although you are limited to £5,640 per year from April). However, the interest advantage depends on mortgage rates not increasing for the next five years. If you don't want to take that risk, then the arithmetic of paying off your mortgage might help you decide.

The arithmetic of mortgage repayment

Let's say you take out a £200,000 repayment mortgage at 4% for 25 years. Your monthly payment will be £1,056. At this interest rate, you will repay £316,702 over 25 years.

If you decide to overpay by £100 per month (by paying £1,156 a year) and keep paying this amount, you would save nearly £18,000 of interest (tax free) and take just over three years off your mortgage term.

As you can see, the numbers become more attractive with bigger overpayments and higher interest rates.

This looks like a reasonable savings plan combined with the benefit of freeing up several years of spare cash. If you have the ability to make bigger lump sum payments, then the numbers are even more powerful.

For example, if you used your Isa allowance to make a capital repayment at the end of every year, a £200,000 mortgage at 4% interest could be paid off in 13 years, saving £64,211 in interest payments.

What to bear in mind before making over-payments

Can you afford to make extra payments? Don't overstretch yourself.

Pay off any expensive personal loan or credit card balances first.

Beware of repayment penalties, although these may still be worth paying if the interest savings are big enough.

Consider an offset mortgage to achieve similar benefits if you don't want to tie up money in your house.